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Full text: George W. Bush speech on Trumpism

By POLITICO STAFF

10/19/2017 12:56 PM EDT

Below is a transcript of George W. Bush’s speech delivered Oct. 19, 2017 at the at the “Spirit of Liberty: At Home, In The World” event in New York.

Thank you all. Thank you. Ok, Padilla gracias. So, I painted Ramon. I wish you were still standing here. It’s a face only a mother could love – no, it’s a fabulous face. (Laughter.) I love you Ramon, thank you very much for being here.

And, Grace Jo thank you for your testimony. And, big Tim. I got to know Tim as a result of Presidential Leadership Scholars at the Bush Center along with the Clinton Foundation, with help from 41 and LBJ’s libraries.

I am thrilled that friends of ours from Afghanistan, China, North Korea, and Venezuela are here as well. These are people who have experienced the absence of freedom and they know what it’s like and they know there is a better alternative to tyranny.

Laura and I are thrilled that the Bush Center supporters are here. Bernie [Tom Bernstein], I want to thank you and your committee. I call him Bernie. (Laughter.)

It’s amazing to have Secretary Albright share the stage with Condi and Ambassador Haley. For those of you that kind of take things for granted, that’s a big deal. (Laughter and Applause.) Thank you.

We are gathered in the cause of liberty this is a unique moment. The great democracies face new and serious threats – yet seem to be losing confidence in their own calling and competence. Economic, political and national security challenges proliferate, and they are made worse by the tendency to turn inward. The health of the democratic spirit itself is at issue. And the renewal of that spirit is the urgent task at hand.

Since World War II, America has encouraged and benefited from the global advance of free markets, from the strength of democratic alliances, and from the advance of free societies. At one level, this has been a raw calculation of interest. The 20th century featured some of the worst horrors of history because dictators committed them. Free nations are less likely to threaten and fight each other.
And free trade helped make America into a global economic power.

For more than 70 years, the presidents of both parties believed that American security and prosperity were directly tied to the success of freedom in the world. And they knew that the success depended, in large part, on U.S. leadership. This mission came naturally, because it expressed the DNA of American idealism.

We know, deep down, that repression is not the wave of the future. We know that the desire for freedom is not confined to, or owned by, any culture; it is the inborn hope of our humanity. We know that free governments are the only way to ensure that the strong are just and the weak are valued. And we know that when we lose sight of our ideals, it is not democracy that has failed. It is the failure of those charged with preserving and protecting democracy.

This is not to underestimate the historical obstacles to the development of democratic institutions and a democratic culture. Such problems nearly destroyed our country – and that should encourage a spirit of humility and a patience with others. Freedom is not merely a political menu option, or a foreign policy fad; it should be the defining commitment of our country, and the hope of the world.

That appeal is proved not just by the content of people’s hopes, but a noteworthy hypocrisy: No democracy pretends to be a tyranny. Most tyrannies pretend they are democracies. Democracy remains the definition of political legitimacy. That has not changed, and that will not change.

Yet for years, challenges have been gathering to the principles we hold dear. And, we must take them seriously. Some of these problems are external and obvious. Here in New York City, you know the threat of terrorism all too well. It is being fought even now on distant frontiers and in the hidden world of intelligence and surveillance. There is the frightening, evolving threat of nuclear proliferation and outlaw regimes. And there is an aggressive challenge by Russia and China to the norms and rules of the global order – proposed revisions that always seem to involve less respect for the rights of free nations and less freedom for the individual.

These matters would be difficult under any circumstances. They are further complicated by a trend in western countries away from global engagement and democratic confidence. Parts of Europe have developed an identity crisis. We have seen insolvency, economic stagnation, youth unemployment, anger about immigration, resurgent ethno-nationalism, and deep questions about the meaning and durability of the European Union.

America is not immune from these trends. In recent decades, public confidence in our institutions has declined. Our governing class has often been paralyzed in the face of obvious and pressing needs. The American dream of upward mobility seems out of reach for some who feel left behind in a changing economy. Discontent deepened and sharpened partisan conflicts. Bigotry seems emboldened. Our politics seems more vulnerable to conspiracy theories and outright fabrication.

There are some signs that the intensity of support for democracy itself has waned, especially among the young, who never experienced the galvanizing moral clarity of the Cold War, or never focused on the ruin of entire nations by socialist central planning. Some have called this “democratic deconsolidation.” Really, it seems to be a combination of weariness, frayed tempers, and forgetfulness.

We have seen our discourse degraded by casual cruelty. At times, it can seem like the forces pulling us apart are stronger than the forces binding us together. Argument turns too easily into animosity. Disagreement escalates into dehumanization. Too often, we judge other groups by their worst examples while judging ourselves by our best intentions – forgetting the image of God we should see in each other.

We’ve seen nationalism distorted into nativism – forgotten the dynamism that immigration has always brought to America. We see a fading confidence in the value of free markets and international trade – forgetting that conflict, instability, and poverty follow in the wake of protectionism.

We have seen the return of isolationist sentiments – forgetting that American security is directly threatened by the chaos and despair of distant places, where threats such as terrorism, infectious disease, criminal gangs and drug trafficking tend to emerge.

In all these ways, we need to recall and recover our own identity. Americans have a great advantage: To renew our country, we only need to remember our values.

This is part of the reason we meet here today. How do we begin to encourage a new, 21st century American consensus on behalf of democratic freedom and free markets? That’s the question I posed to scholars at the Bush Institute. That is what Pete Wehner and Tom Melia, who are with us today, have answered with “The Spirit of Liberty: At Home, In The World,” a Call to Action paper.

The recommendations come in broad categories. Here they are: First, America must harden its own defenses. Our country must show resolve and resilience in the face of external attacks on our democracy. And that begins with confronting a new era of cyber threats.

America is experiencing the sustained attempt by a hostile power to feed and exploit our country’s divisions. According to our intelligence services, the Russian government has made a project of turning Americans against each other. This effort is broad, systematic and stealthy, it’s conducted across a range of social media platforms. Ultimately, this assault won’t succeed. But foreign aggressions – including cyber-attacks, disinformation and financial influence – should not be downplayed or tolerated. This is a clear case where the strength of our democracy begins at home. We must secure our electoral infrastructure and protect our electoral system from subversion.

The second category of recommendations concerns the projection of American leadership – maintaining America’s role in sustaining and defending an international order rooted in freedom and free markets.

Our security and prosperity are only found in wise, sustained, global engagement: In the cultivation of new markets for American goods. In the confrontation of security challenges before they fully materialize and arrive on our shores. In the fostering of global health and development as alternatives to suffering and resentment. In the attraction of talent, energy and enterprise from all over the world. In serving as a shining hope for refugees and a voice for dissidents, human rights defenders, and the oppressed.

We should not be blind to the economic and social dislocations caused by globalization. People are hurting. They are angry. And, they are frustrated. We must hear them and help them. But we can’t wish globalization away, any more than we could wish away the agricultural revolution or the industrial revolution. One strength of free societies is their ability to adapt to economic and social disruptions.
And that should be our goal: to prepare American workers for new opportunities, to care in practical, empowering ways for those who may feel left behind. The first step should be to enact policies that encourage robust economic growth by unlocking the potential of the private sector, and for unleashing the creativity and compassion of this country.

A third focus of this document is strengthening democratic citizenship. And here we must put particular emphasis on the values and views of the young.

Our identity as a nation – unlike many other nations – is not determined by geography or ethnicity, by soil or blood. Being an American involves the embrace of high ideals and civic responsibility. We become the heirs of Thomas Jefferson by accepting the ideal of human dignity found in the Declaration of Independence. We become the heirs of James Madison by understanding the genius and values of the U.S. Constitution. We become the heirs of Martin Luther King, Jr., by recognizing one another not by the color of their skin, but by the content of their character.

This means that people of every race, religion, and ethnicity can be fully and equally American. It means that bigotry or white supremacy in any form is blasphemy against the American creed. (Applause.)
And it means that the very identity of our nation depends on the passing of civic ideals to the next generation.

We need a renewed emphasis on civic learning in schools. And our young people need positive role models. Bullying and prejudice in our public life sets a national tone, provides permission for cruelty and bigotry, and compromises the moral education of children. The only way to pass along civic values is to first live up to them.

Finally, the Call to Action calls on the major institutions of our democracy, public and private, to consciously and urgently attend to the problem of declining trust.

For example, our democracy needs a media that is transparent, accurate and fair. Our democracy needs religious institutions that demonstrate integrity and champion civil discourse. Our democracy needs institutions of higher learning that are examples of truth and free expression.

In short, it is time for American institutions to step up and provide cultural and moral leadership for this nation.

Ten years ago, I attended a Conference on Democracy and Security in Prague. The goal was to put human rights and human freedom at the center of our relationships with repressive governments. The Prague Charter, signed by champions of liberty Vaclav Havel, Natan Sharansky, Jose Maria Aznar, called for the isolation and ostracism of regimes that suppress peaceful opponents by threats or violence.

Little did we know that, a decade later, a crisis of confidence would be developing within the core democracies, making the message of freedom more inhibited and wavering. Little did we know that repressive governments would be undertaking a major effort to encourage division in western societies and to undermine the legitimacy of elections.

Repressive rivals, along with skeptics here at home, misunderstand something important. It is the great advantage of free societies that we creatively adapt to challenges, without the direction of some central authority. Self-correction is the secret strength of freedom. We are a nation with a history of resilience and a genius for renewal.

Right now, one of our worst national problems is a deficit of confidence. But the cause of freedom justifies all our faith and effort. It still inspires men and women in the darkest corners of the world, and it will inspire a rising generation. The American spirit does not say, “We shall manage,” or “We shall make the best of it.” It says, “We shall overcome.” And that is exactly what we will do, with the help of God and one another.

What Is a Nativist?

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To understand the ideas shaping the Trump administration, the political scientist Cas Mudde once told me, you have to understand populism, authoritarianism, and nativism, because Donald Trump “fires on all three cylinders.” I’ve previously explored the definitions of populism and authoritarianism. But what is nativism? How is it different from “nationalism” or “patriotism”—words that the alleged nativists themselves typically use to describe their ideology? Is Trump, the man who just ordered air strikes against a foreign leader for attacking people in a foreign country, really a nativist? And why, when it would seem to raise valid questions about the rights of natives versus non-natives, does nativism have such negative associations?

What is a nativist?

There’s a reason the word “nativism” appears regularly in the U.S. media and not elsewhere: According to Mudde, a professor at the University of Georgia, nativism is an almost exclusively American concept that is rarely discussed in Western Europe. The term’s origins lie with mid-19th century political movements in the United States—most famously the Know Nothing party—thatportrayed Catholic immigration from countries such as Germany and Ireland as a grave threat to native-born Protestant Americans. (Never mind that the Protestant “natives” were themselves migrants relative to another native population.) Nativism arose in a natural place: a nation constructed through waves of migration and backlashes to migration, where the meaning of “native” is always evolving.

Europeans tend to talk about “ultra-nationalism” or “xenophobia” or “racism” rather than nativism, said Mudde, who is Dutch. But this language, in his view, doesn’t fully capture the phenomenon, which “isn’t just a prejudice [against] non-natives” but also “a view on how a state should be structured.”

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Nativism, Mudde told me, is “xenophobic nationalism.” It is “an ideology that wants congruence of state and nation—the political and the cultural unit. It wants one state for every nation and one nation for every state. It perceives all non-natives … as threatening. But the non-native is not only people. It can also be ideas.” Nativism is most appealing during periods when people feel the harmony between state and nation is disappearing.

Eric Kaufmann, a political scientist at the University of London’s Birkbeck College, calls nativism a “crude” term and prefers something more precise: “majority-ethnic nationalism,” which applies to people who consider themselves native to or settlers of a country and want to protect their “demographic predominance in that territory.”

Some types of nationalism are concerned with ideology (America as the leader of the free world) or status (American as the most powerful country in the world). But ethnic nationalism is “less concerned with getting to the moon and being number one,” Kaufmann said. It’s a “boundary-based nationalism.”

Nativists typically spend more time defining “them” (non-natives) than “us” (natives), Mudde added, because the more specific the “us,” the more it raises thorny questions of national identity and excludes segments of the population who might otherwise support the nativist politician. The native is often depicted as the unspoken inverse of The Other: “The other is barbarian, which makes you modern. The other is lazy, which makes you hardworking. The other is Godless, which makes you God-fearing.”

Long before Trump embraced the slogan “America First,” Elisabeth Ivarsflaten taught her students at the University of Bergen in Norway to think of nativist politicians as the “my-country-first party.” All political leaders should (theoretically) put their country’s interests first. But nativism goes beyond that logic. “The idea that these parties roughly engage is that too much emphasis is being put on internationalization and accommodating people who want to come into the country” but aren’t originally from there, Ivarsflaten said. Whether nativism involves opposing the European Union because Germans have to bail out Greeks, or opposing multiculturalism because it means accepting forms of Islamic dress, the idea is that “there is a native population or a native culture that should be given priority over other kinds of cultures.”Ivarsflaten places nativism in the broader category of right-wing populism, an ideology premised on representing the virtuous “people” against a corrupt “elite.” She has found that all the populist-right parties that performed well in Western European elections in the early 2000s had one thing in common: They tapped into people’s complaints about immigration. Other grievances—regarding the European Union, economic policy and the state of the economy, or political elitism and corruption—did not account for the success of these parties as consistently or powerfully as immigration issues did. “As immigration policy preferences become more restrictive, the probability of voting for the populist right increases dramatically,” she wrote at the time.

Is Donald Trump a nativist?

Mudde argues that nativism was one of the first features of Trump’s “core ideology” as a presidential candidate, though he acknowledges that Trump isn’t a consistent ideologue. (Mudde believes Trump adopted populism more recently, under the influence of White House Chief Strategist Steve Bannon.)

And Trump quickly learned that nativism was popular; Mudde notes that Trump’s campaign speeches were initially quite boring—with lengthy digressions about his real-estate deals—but that crowds erupted in applause when he spoke about building a border wall with Mexico or barring radical Islamic terrorists from the country.

Several top officials in the Trump administration, including Bannon and Attorney General Jeff Sessions, could be described as nativist, Mudde added, and a number of the administration’s early policies, including the travel ban and the creation of an office focused on crimes committed by undocumented immigrants, could be as well.

Asked whether Trump qualifies as a nativist, Kaufmann focused on Trump’s supporters rather than the man himself. He cited findings that Americans who were worried about immigrants threatening U.S. values and eroding the white majority in the United States were more likely to enthusiastically back Trump during the campaign. Kaufmann interprets Trump’s “Make America Great Again” nationalism as less about reasserting American power in the world than “about restoring a kind of cultural particularism and identity.” Trump’s core supporters, in Kaufmann’s view, are “people who feel that they’ve become disoriented culturally,” not people who are alarmed by a loss of American prestige overseas.

Still, Trump is the leader of the Republican Party, not some small, European-style nativist party, Ivarsflaten points out. “He can’t really reinvent the whole Republican ideology through a nativist lens.” She also suggested that Trump isn’t so much an ideologue as a blank canvas onto which others project ideologies. The president’s decision to bomb the Syrian military for using chemical weapons against civilians, for example, seems to represent a victory for traditional Republican internationalists over the Bannonite wing of the Trump administration, though the triumph might prove temporary. It’s also difficult to square Trump the America-First nativist with Trump the globe-trotting businessman.“I have no idea what the ideological lens of Donald Trump is actually,” Ivarsflaten said. “You tell me.”

So what if Trump is a nativist?

One reason Donald Trump’s presidency is so momentous is that, if he is indeed a nativist, he would be one of the first of his ilk to come to power in the West since 1980. In a 2012 paper on nativism in Europe and North America, Mudde observed that in the rare instances in which nativist parties had been part of government—in European countries such as Austria, Italy, and Switzerland—they had played a significant role in introducing restrictive immigration policies. But the story was different in the United States and Canada.

“In the United States,” Mudde wrote at the time, “nativist actors have had indirect effects on policy at best, as the nativist voices within the Republican Party, for example, have not made it into prominent positions in government.” The closest America had come to having a viable nativist party, Mudde noted, was with Pat Buchanan’s Reform Party in the 2000 presidential election. (Buchanan’s slogan? “America First!”)

Now nativism, conceived in the United States and revived in Europe, has returned with force to its native land.“Nativism is the core feature of the radical right today,” Mudde told me, and the other ideological dimensions of contemporary radical-right politicians—like populism and authoritarianism—tend to pass through a nativist filter. In terms of populism, he said, “the elite is considered to be corrupt because it works in the interest of the non-natives or it undermines the native group.” In terms of authoritarianism, which emphasizes the enforcement of law and order, “crime is almost always linked” to outsiders. While nativist movements have long argued that immigrants pose a multifaceted threat to the culture, security, and economic well-being of natives, Mudde writes in his 2012 paper, in the post-9/11 era the cultural and security threats have become intertwined with religion. “Increasingly the immigrant is seen as a Muslim, not a Turk or Moroccan,” he notes.Some studies indicate that as levels of immigration to a country rise, so does support for nativist, radical-right politicians. But Mudde contends that the connection is more complicated than that: It’s not sufficient for the ranks of the foreign-born in a nation to swell; immigration also has to be turned into a political issue. It has to be made visible to a large part of the population. He pointed out that labor-migration flows to Western Europe increased in the years before the 1973 oil crisis, but that immigration wasn’t politicized there until the 1980s and ’90s, when asylum-seekers flocked to the region, efforts to integrate immigrants and their children into society and the labor market sputtered, and radical-right parties like the National Front in France began achieving political success.

Trump, for his part, rose to power at a time when more Mexican immigrants were leaving than arriving in the United States, and when the number of undocumented immigrants in the U.S. was flatlining. “This doesn’t mean that Trump [made] people xenophobic or nativist,” Mudde said. “A large portion of the population everywhere in the world is nativist.” But those people might have based their vote in previous elections on other issues. When a politician manages to shift the debate to matters of security and immigration, it can change how people vote.Nativists, like populists, “raise some important questions,” Mudde said. “The argument that borders should be controlled” shouldn’t be controversial, “and it’s definitely not undemocratic. It’s the democratic right of a state and its population to decide who can come in [to the country] and under which conditions.”But nativists, like populists, give “highly problematic” answers, according to Mudde. “Populism sees the people as one and pure. Nativism sees the people as one in a cultural, ethnic, predetermined sense. And that nation doesn’t exist. The nation is changing virtually on a daily basis.” This singular vision threatens a central component of liberal democracies like the United States: pluralism, which holds that society is composed of different groups with different interests that must all be considered legitimate.Yet what is also legitimate, according to Kaufmann, is for people to try and shore up their ethnic group’s culture and share of the population, so long as they are open to processes like assimilation and intermarriage. He cited the contrast that the Brookings scholar Shadi Hamid has made between racism and racial self-interest. “There is an important distinction between disliking other groups, treating them badly, or seeking some kind of racial purity, all of which would be dangerous and things that I think you’d call racism, from racial self-interest, which could be just trying to maintain the vitality of your group and even perhaps seeking for your group not to decline,” Kaufmann said. “If the majority feels that it can’t express those views without being tarred as racist, I’m not sure that’s a good state of affairs.”Kaufmann referenced a poll he helped conduct showing that 73 percent of white Hillary Clinton voters say a white American who wants to reduce immigration to maintain his or her group’s share of the population is being racist, while only 11 percent of white Trump voters agree. (A similar but narrower difference was observed between white British “Remain” and “Leave” voters in the United Kingdom’s recent referendum on the European Union.) “There’s a much wider definition of racism among Clinton voters and a much narrower definition among Trump voters,” Kaufmann told me.Nativism is currently gaining traction across the Western world because ethnic majorities are under demographic pressure, Kaufmann explained. Fertility rates are falling, which, in aging societies, creates a need for immigration. (This is the dynamic the Republican congressman Steve King recently referred to in his widely condemnedtweet that “culture and demographics are our destiny” and that “we can’t restore our civilization with somebody else’s babies.”) And the message from political leaders, Kaufmann said, is often, “‘If you’re the majority, you’re kind of the past. And you’ve got to embrace diversity.’ The subtext of that is, ‘You’re shrinking.’”If politicians want to blunt the appeal of nativism, Kaufmann argued, they need to highlight the successes of assimilation—the signs of continuity and not just change—and tone down the diversity talk (he believes this rhetoric about multiculturalism is in part responsible for people overestimating the size of minority populations in their country). They need to reassure ethnic majorities that they have a future and offer a vision of what that future might look like.https://www.theatlantic.com/international/archive/2017/04/what-is-nativist-trump/521355/

Senate Passes Budget Blueprint Key To Trump Tax Effort

Senator Rand Paul On Republicans Reducing The National Debt

GOP Congress Presides Over Highest Spending Since Obama’s Stimulus

By Terence P. Jeffrey | October 20, 2017 | 2:09 PM EDT

(Screen Capture)

(CNSNews.com) – Real federal spending in fiscal 2017, which ended on Sept. 30, was higher than in any year in the history of the United States other than fiscal 2009, which was the year that President Barack Obama’s $840 billion stimulus law was enacted.

While it was collecting the third highest total tax revenues in U.S. history, the federal government ran a deficit $665,712,000,000 because of its high total spending.

Republicans have controlled the House of Representatives since 2011, after winning a majority of seats in the 2010 election. They have controlled the Senate since 2015, after winning a majority in the 2014 election. In fiscal years 2016 and 2017, a Congress in which the Republican Party controls both houses was responsible for enacting all federal spending legislation.

Total federal spending in fiscal 2017, according to the Treasury, was $3,980,605,000,000. Total federal tax revenue was $3,314,893,000,000.

Prior to this year, the highest level of real federal spending was the $4,024,794,600,000 in constant 2017 dollars (adjusted using the Bureau of Labor Statistics inflation calculator) that the Treasury spent in fiscal 2009.

In the years after 2009, real federal spenpding hit its lowest level ($3,633,572,490,000 in constant 2017 dollars) in fiscal 2014. In fiscal years 2015, 2016, and 2017 federal spending has been on the rise again—reaching $3,980,605,000,000 this year, the second highest spending level in the nation’s history.

On the tax side, federal individual income taxes hit their all-time peak in fiscal 2015, when the Treasury took in $1,598,265,180,000 in constant 2017 dollars in individual income taxes.

In fiscal 2016, individual income tax collections dropped to $1,580,598,300,000 in 2017 dollars.

Then, in fiscal 2017, individual income tax collections climbed back up to $1,587,119,000,000, the second largest sum in individual income taxes the federal government has ever collected.

Total federal tax revenue also peaked in 2015 at $3,369,881,960,000 in 2017 dollars. It then dropped to $3,339,631,960,000 in fiscal 2016, and dropped again to $3,314,894,000,000 in fiscal 2017.

According to a study by the Congressional Budget Office, the largest budgetary impact of President Obama’s 2009 stimulus law hit in fiscal 2010, which began on Oct. 1, 2009. The three first fiscal years under the law–2009, 2010, 2011–saw the biggest spending increases from it. “By CBO’s estimate, close to half the impact occurred in fiscal 2010, and more than 95 percent of ARRA’s budgetary impact was realized by the end of December 2014,” said the CBO study.

According to the CBO, Obama’s stimulus increased federal spending by $114 billion in fiscal 2009, $235 billion in fiscal 2010, and $147 billion in fiscal 2011. In fiscal 2012, the spending increase caused by the stimulus dropped to $59 billion. The CBO estimates that in the four fiscal years from 2016 through 2019, the Obama stimulus will only add a total of $28 billion to federal spending.

[Correction: This story originally reported that real federal spending hit an all-time high in fiscal 2010, when spending from the Obama stimulus peaked. In fact, real federal spending hit an all-time high in fiscal 2009, the year that the Obama stimulus was enacted.]

The FY 2018 Senate Budget and Budget Gimmicks

The Senate Budget Committee recently passed a Fiscal Year (FY) 2018 budget resolution that proposes a path to on-budget balance after ten years exclusively by cutting spending. Unfortunately, the budget relies on several gimmicks to achieve these savings.

Prior to the budget’s release, we warned of eight possible “budget gimmicks” that could be used to make the budget appear more responsible than it actually is. This budget unfortunately relies on a number of these gimmicks, including rosy growth assumptions and “magic asterisks” (unspecified savings). At the same time, the budget does include small positive steps to reduce the use of certain gimmicks.

The budget claims $4.7 trillion of on-budget savings over a decade versus its chosen baseline that assumes a quick drawdown in war spending, and $6 trillion of savings compared to current law (see our summary at Senate Budget Committee Releases FY 2018 Budget). As a result, debt would fall from 77 percent of Gross Domestic Product (GDP) today to 70 percent by 2027. However, half of this $6 trillion in savings comes from budget gimmicks rather than real policy choices.

Without the budget’s rosy economic assumptions and unspecified savings, the debt would rise to 81 percent of GDP and roughly stabilize there, rather than falling to 70 percent. Making matters worse, the legitimate savings are not included in reconciliation. While the budget claims trillions of savings, its reconciliation instructions would actually facilitate a $1.5 trillion increase in deficits.

Specifically, the budget includes a large process gimmick by exempting a deficit-increasing reconciliation bill from the Senate Pay-As-You-Go (PAYGO) rule, while attempting to strengthen the rule otherwise. Though not a gimmick, the budget also creates some confusion by focusing on “on-budget” deficits instead of unified budget deficits.

The budget’s positive steps crack down on other gimmicks that would affect legislation, including by restricting the use of phony Changes in Mandatory Programs (CHIMPs) as offsets and creating a point of order against use of the Overseas Contingency Operations designation. These improvements would affect actual legislation and should be included in any future conferenced budget.

The budget’s gimmicks, however, should be removed.

Rosy Growth Assumptions ($1.2 trillion on-budget)

For the past 25 years, every budget resolution but one has based their assumptions for economic growth on the Congressional Budget Office’s (CBO) projections. Given an aging population, CBO projects real economic growth will average a modest 1.8 percent over the decade, while other forecasters estimate growth rates between 1.6 and 2.1 percent per year.

In contrast, this resolution (like its <a< span=””></a<>< span=””> href=”http://www.crfb.org/papers/fy-2018-house-budget-and-budget-gimmicks”>House companion) assumes 2.6 percent average real GDP growth after its enacted policies, well outside of the mainstream and over 40 percent (0.8 percentage points) higher than CBO’s baseline. The budget does not include important details on tax, immigration, or regulatory reforms to explain its growth assumption. CBO estimated the growth from the budget’s deficit reduction, but it only explains less than one-tenth of the additional growth claimed by the budget. Actually getting to 2.6 percent sustained growth will require many pro-growth policy changes and significant luck.

These rosy assumptions make the budget’s deficit numbers look $1.2 trillion better by assuming higher revenue collection and GDP, thus decreasing debt and deficits as a share of the economy. The budget does not provide any information to support this large of an effect on growth or what effects that growth might have on the off-budget portions of revenue.

To be sure, a few previous budget resolutions have incorporated some economic feedback as do all President’s budgets. But this feedback has always been calculated by official scorekeepers at the CBO and generally been modest. Indeed, this budget also counts that feedback, resulting in a further $178 billion of deficit reduction on top of the $1.2 trillion.

Congress should not simply make a rosy economic growth assumption and build its budget based on that (nor should the President). To be credible, the Congressional budgets should instead rely on CBO’s growth assumptions and make the tough choices from there to achieve its fiscal goal.

Magic Asterisks and Unspecified Savings ($1.8 trillion)

We’ve warned about “magic asterisks” in the past, when a budget takes credit for savings without specifying the policies that produce them. Savings levels in each budget function (like defense, transportation, and education) should be backed up with specific policies that could legitimately be expected to produce those savings. More egregious in budget resolutions are undistributed cuts. Undistributed cuts should be used only sparingly to reflect policies that may cut across multiple functions or legitimate rescissions, not as a mechanism to make the numbers add up without providing substance behind them.

Unfortunately, the Senate budget contains $1.6 trillion in undistributed outlay savings (of which about $1 trillion are from mandatory spending and $600 billion are from discretionary spending). After accounting for the interest cost, the unspecified cuts account for $1.8 trillion over ten years.

Thought of another way, of the $6.2 trillion of spending cuts and related interest savings in the budget, only $4.4 trillion are specified in terms of where they would apply. Making matters worse, only a minimum of $1 billion need to be “reconciled,” suggesting the Senate may only intend to enact 0.02 percent of its claimed spending reductions.

Exempting Reconciliation from Senate PAYGO

The Senate budget resolution contains changes to the existing Senate PAYGO rules. Senate PAYGO is a Senate-only rule that provides for a 60-vote point of order against legislation that increases the deficit over the first five or ten years following a bill’s enactment. Senate PAYGO is in place to remind Senators that they should pay for legislation and to prohibit actions that do add to the debt unless they get 60 votes to waive the point of order.

The Senate budget in some ways strengthens PAYGO by adding a first-year test. But at the same time, it substantially weakens PAYGO by exempting a $1.5 trillion reconciliation package from enforcement.

The $1.5 trillion exemption from Senate PAYGO comes in the form of a reserve fund allowing the Chairman of the Senate Budget Committee to essentially clear PAYGO consideration for the bill. While this provision does not change the numbers in the budget itself, it allows policymakers to evade the rules that help ensure a bad debt situation does not continue to get worse.

Any positive gains from adding one-year PAYGO would be more than wiped out by clearly and blatantly avoiding PAYGO rules.

Other Issues and Improvements

Though the Senate budget resolution uses several gimmicks, it also contains a couple praiseworthy provisions to limit specific budget gimmicks in future legislation. If the proposed budget were to be adopted, these limits would restrict this year’s legislation from using these gimmicks. These provisions should be contained in a future concurrent budget resolution.

The budget resolution limits the use of two gimmicks. First, it continues to phase down the use of phony CHIMPs with no outlay savings as offsets for appropriations. The limits were originally in place for 2018 and 2019 and are now extended to 2020 as well. Limits were first established in the FY 2016 budget. Additionally, there is a separate point of order against CHIMPs in excess of $11.2 billion from the Crime Victims Fund in FY 2018.

Second, the budget adds a point of order against spending that is designated as war spending, also known as Overseas Contingency Operations (OCO). While there are many legitimate uses of the OCO designation, in pastyears it has been abused as a way of backfilling capped defense and non-defense discretionary spending. The point of order applies to any designation of OCO and thus will force appropriators to take an extra look to evaluate how reasonable the OCO funding is. One such test might be to see if OCO funding is larger than the President’s request for that year.

On the other hand, the budget does make one internal change that – while not a gimmick – could create confusion. In the past, budgets have measured the “unified” budget deficit, which includes the “on-budget” deficit as well as “off-budget” deficits attributable to Social Security and the Post Office. This year, the budget switched to only focusing on the “on-budget” deficit. As a result, the budget claims to achieve balance but actually leaves a unified budget deficit of $149 billion. This level of deficit is not particularly problematic as a fiscal matter, but it does create some confusion and misperception.

Adding It All Up – How Much Does the Budget Really Reduce Deficits and Debt?

In total, gimmicks reduce the Senate budget resolution’s projected deficit reduction by half, from $6.0 trillion to $2.9 trillion. This means debt would rise to and then essentially stabilize at around 81 percent of GDP by 2027 rather than fall to 70 percent with all of the on-budget claimed savings. This would still be an improvement over CBO’s June projection that debt will rise to 91 percent of GDP by 2027.

It also means the budget would not reach on-budget balance in 2027, instead showing a $416 billion on-budget deficit. This translates to a $767 billion unified deficit at 2.7 percent of GDP. Still, this is a noticeable improvement over CBO’s projection of a $1.5 trillion deficit in 2027 (5.2 percent of GDP).

Importantly, even these numbers may paint a misleading picture of what the Senate budget would do. While the budget shows real deficit reduction relative to current law, it facilitates large deficit increases through $1.499 trillion of net deficit-increasing reconciliation instructions. If these instructions were followed, debt would rise to 97 percent of GDP by 2027 and unified deficits would reach $1.66 trillion (5.9 percent of GDP).

* * * * *

The United States faces serious fiscal challenges, with high and rising debt for the foreseeable future. Gimmicks make it difficult to take Congress’s commitment to fiscal responsibility seriously. The Senate budget is not fiscally responsible as it relies on gimmicks to artificially improve its numbers and contains very real reconciliation instructions that could add up to $1.5 trillion to the deficit.

The United States federal budget for fiscal year 2018, named America First: A Budget Blueprint to Make America Great Again, was the first budget proposed by newly-elected President Donald Trump, submitted to the 115th Congress on March 16, 2017. If passed, the $4.1 trillion budget will fund government operations for fiscal year 2018, which runs from October 1, 2017 to September 30, 2018.[2][3]

Trump administration budget proposal

The Trump administration proposed its 2018 budget on February 27, 2017, ahead of his address to Congress, outlining $54 billion in cuts to federal agencies and an increase in defense spending.[4] On March 16, 2017, President Trump sent his budget proposal to Congress, remaining largely unchanged from the initial proposal.[5]

CBO scoring of the budget

CBO chart explaining the impact of the 2018 budget on spending, tax revenue, and deficits over the 2018–2027 periods.

The Congressional Budget Office reported its evaluation of the budget on July 13, 2017, including its effects over the 2018–2027 period.

Mandatory spending: The budget cuts mandatory spending by a net $2,033 billion (B) over the 2018–2027 period. This includes reduced spending of $1,891B for healthcare, mainly due to the proposed repeal and replacement of the Affordable Care Act (ACA/Obamacare); $238B in income security (“welfare”); and $100 billion in reduced subsidies for student loans. This savings would be partially offset by $200B in additional infrastructure investment.

Discretionary spending: The budget cuts discretionary spending by a net $1,851 billion over the 2018–2027 period. This includes reduced spending of $752 billion for overseas contingency operations (defense spending in Afghanistan and other foreign countries), which is partially offset by other increases in defense spending of $448B, for a net defense cut of $304B. Other discretionary spending (cabinet departments) would be reduced by $1,548B.

Revenues would be reduced by $1,000B, mainly by repealing the ACA, which had applied higher tax rates to the top 5% of income earners. Trump’s budget proposal was not sufficiently specific to score other tax proposals; these were simply described as “deficit neutral” by the Administration.

Deficits: CBO estimated that based on the policies in place as of the start of the Trump administration, the debt increase over the 2018–2027 period would be $10,112B. If all of President Trump’s proposals were implemented, CBO estimated that the sum of the deficits (debt increases) for the 2018–2027 period would be reduced by $3,276B, resulting in $6,836B in total debt added over the period.[6]

CBO estimated that the debt held by the public, the major subset of the national debt, would rise from $14,168B (77.0% GDP) in 2016 to $22,337B (79.8% GDP) in 2027 under the President’s budget.[7]

Department and program changes

The proposed 2018 budget includes $54 billion in cuts to federal departments, and a corresponding increase in defense and military spending.[8][9]

Largest cuts go to the Office of Science; ARPA-E and Departmental Loan Programs eliminated. Increases spending on National Nuclear Security Administration by 11.4% while slashing high energy physics and almost all other science programs (Basic Energy Sciences, Biological and Environmental Research, Fusion Energy Sciences, High Energy Physics, Nuclear Physics, Infrastructure and Administration, Workforce Development for Teachers and Scientists) by 18%. The only science program not to receive a cut is the Advanced Scientific Computing Research program, which is to receive a small budget increase of $101 million. Money spent on the NNSA would go to the modernization and upkeep of nuclear weapons as well as $1.5 billion going to naval nuclear reactors. The budget cuts funding for energy programs by over 50% reducing the funding by $2.4 billion. Energy programs cut include: Energy Efficiency and Renewable Energy, Electricity Delivery and Energy Reliability, Nuclear Energy, Fossil Energy Research and Development.[12][13]

Eliminates over 4000 jobs. Eliminates funding for 49 National Historic Sites and decreases funding for land acquisition. Decreases funding for Cooperative Endangered Species Conservation Fund. Cuts funding by $2 million for dealing with invasive species.[14][15]

Expands health services and the benefit claims system. Slashes disability benefits to 225,000 elderly veterans. The VA currently provides additional disability compensation benefits to Veterans, irrespective of age, who it deems unable to obtain or maintain gainful employment due to their service-connected disabilities through a program called Individual Unemployability (IU). The IU program is a part of VA’s disability compensation program that allows VA to pay certain Veterans disability compensation at the 100 percent rate, even though VA has not rated their service-connected disabilities at the total level. These Veterans have typically received an original disability ratings between 60 and 100 percent. Under this proposal, Veterans eligible for Social Security retirement benefits would have their IU terminated upon reaching the minimum retirement age for Social Security purposes, or upon enactment of the proposal if the Veteran is already in receipt of Social Security retirement benefits.These Veterans would continue to receive VA disability benefits based on their original disability rating, at the scheduler evaluation level. IU benefits would not be terminated for Veterans who are ineligible for Social Security retirement benefits, thus allowing them to continue to receive IU past minimum retirement age. Savings to the Compensation and Pensions account are estimated to be $3.2 billion in 2018, $17.9 billion over five years, and $40.8 billion over ten years.[16]

Cuts funding for Earth science programs and missions, and eliminates the Office of Education. Cuts funding for the Aeronautics Research Mission Directorate by $166 million (−21%). Cuts funding for Space Technology research by $148.4 million (−18%). Cuts funding for Human Exploration Operations by $4478.9 million (−53%). Cuts funding for the Education program by $62.7 million (−62.7%).[17][18]

Criticism

Economist Joseph Stiglitz said about the 2018 budget proposal: “Trump’s budget takes a sledgehammer to what remains of the American Dream”. Senator Bernie Sanders also criticized the proposal: “This is a budget which says that if you are a member of the Trump family, you may receive a tax break of up to $4 billion, but if you are a child of a working-class family, you could well lose the health insurance you currently have through the Children’s Health Insurance Program and massive cuts to Medicaid”.[19]

On October 17, 2017, the Senate started to debate the 2018 proposed budget.[22] On October 19, 2017, Senator Heidi Heitkamp (D-N.D.) proposed an amendment to prevent tax increases on people making less than $250,000 a year. It would have also required the Senate to approve a tax-reform bill with 60 votes rather than a simple majority. Senate Budget Committee ChairmanMike Enzi (R-Wyo.) called this language a “poison pill,” and the amendment was defeated 51-47.[23] Several Republican amendments were adopted with broad support. Senator Jeff Flake (R-Ariz.) proposed language to make the “American tax system simpler and fairer for all Americans,” which passed 98-0. Senator Marco Rubio (R-Fla.) proposed an amendment in support of increasing the child tax credit, which passed by voice vote, meaning it was approved without any Senator raising an issue.[23] The Senate approved the 2018 Republican-proposed budget, a step forward for the GOP’s effort to enact tax cuts. The budget, which now moves to the House, is projected to expand the deficit by $1.5 trillion over 10 years. Its passage will allow the GOP to use a procedural maneuver to pass tax legislation through the Senate with 50 or more votes, removing the need for support from Democratic senators. Senator John McCain (R-Ariz.), chairman of the Senate Armed Services Committee, offered an amendment to ensure increases in federal defense spending are prioritized over increases in spending in other areas. “Defense and nondefense are not of the same urgency,” he told reporters Thursday. “We have men and women serving in the military today who are being wounded and killed because they’re not sufficiently funded, armed, trained and equipped.”[23] At the end of the debates and amendments, the Senate narrowly voted 51-49 to pass the fiscal year 2018 budget. All 48 Senate Democrats and Senator Rand Paul voted no. By passing the 2018 budget, it gives way for the tax reform the Republicans want.[24][25]

Story 1: American Collectivism (Resistance Is Futile) vs. American Individualism (I have not yet begun to fight!) — Federal Income, Capital Gains, Payroll,Estate and Gift Taxes, Budget Deficits, National Debt, Unfunded Liabilities, Democratic and Republican Parties, Two Party Tyranny of The Warfare and Welfare State and American Empire Are The Past — The Future Is Fair Tax Less, Surplus Budgets, No Debts, No Unfunded Liabilities, and American Independence Party with A Peace and Prosperity Economy, Representative Constitutional American Republic Are The Future — Lead, Follow or Get Out of The Way — Those Without Power Cannot Defend Freedom — Videos

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Trump hosting Pelosi, Schumer for dinner in extension of Dem outreach

Published September 13, 2017

Fox News

Trump looks to bring Democrats on board with tax reform

President Trump is taking his outreach to Democrats to a new level, planning to host House Minority Leader Nancy Pelosi and Senate Minority Leader Chuck Schumer at the White House for dinner Wednesday night.

The dinner date comes after the president stunned GOP congressional leaders by striking a deal last week with the two senior Democrats for a short-term spending and debt-ceiling deal. While GOP leaders wanted a longer-term package, the deal helped ensure immediate aid to hurricane victims while averting a government shutdown for now.

Now, Trump is trying to jump-start his legislative agenda beginning with tax cuts and tax reform. He had dinner with bipartisan senators Tuesday night.

A source familiar with Wednesday’s planned Pelosi-Schumer dinner told Fox News the meeting will follow up on last week’s sit-down with the Hill leaders.

Schumer, D-N.Y., and Pelosi, D-Calif., are expected to press the president on protections for “dreamers,” young illegal immigrants who had been shielded from deportation under a 2012 Obama administration policy that Trump has since announced he intends to roll back. The Democrats also plan to discuss ways to stabilize the health care markets.

Trump and his aides have defended the president’s new outreach to the minority party – which comes amid some frustration at the White House over the performance of Senate Majority Leader Mitch McConnell, R-Ky., and House Speaker Paul Ryan, R-Wis.

A senior source inside Tuesday’s dinner with bipartisan senators told Fox News that Trump’s new strategy is to meet and work with lawmakers across the aisle — in part, an effort to “shed” the guidance from the Reince Priebus-era where the former chief of staff and his aides held the view that the president should only work with GOP leaders like Ryan and McConnell.

But after the failure of the health care bill and other legislative frustrations, Trump is reverting to a strategy that has worked for him in the past, before his time in the White House. The source said Trump ran an “unconventional campaign” with “unconventional” methods – and the “conventional” methods that were used in the first part of the year were not working for him.

Fox News’ John Roberts, Serafin Gomez and Chad Pergram contributed to this report.

Types

Value-added tax

A value-added tax (VAT) applies to the market value added to a product or material at each stage of its manufacture or distribution. For example, if a retailer buys a shirt for $20 and sells it for $30, this tax would apply to the $10 difference between the two amounts. A simple VAT would be proportional to consumption but would also be regressive on income at higher income levels, as consumption falls as a percentage of income. Savings and investment are tax-deferred until they become consumption. A VAT may exclude certain goods to make it less regressive. It is used in European Union countries.

Sales tax

A sales tax typically applies to the sale of goods, sometimes also to the sales of services. The tax is applied at the point of sale. Laws may allow sellers to itemize the tax separately from the price of the goods or services, or they may require it to be included in the price (tax-inclusive). The tax amount is usually calculated by applying a percentage rate to the taxable price of a sale. When a tax on goods or services is paid to a governing body directly by a consumer, it is usually called a use tax. Often laws provide for the exemption of certain goods or services from sales and use tax.

Excise tax

An excise tax is a sales tax that applies to a specific class of goods, typically alcohol, gasoline (petrol), or tourism. The tax rate varies according to the type of good and quantity purchased and is typically unaffected by the person who purchases it.

Expenditure tax

A direct, personal consumption tax may take the form of an expenditure tax or an income tax that deducts savings and investments, such as the Hall–Rabushka flat tax.[1] A direct consumption tax may be called an expenditure tax, a cash-flow tax, or a consumed-income tax and can be flat or progressive. Expenditure taxes have been briefly implemented in the past in India and Sri Lanka.[2]

This form of tax applies to the difference between an individual’s income and increase/decrease savings. Like the other consumption taxes, simple personal consumption taxes are regressive with respect to income. However, because this tax applies on an individual basis, it can be made as progressive as a progressive personal income tax. Just as income tax rates increase with personal income, consumption tax rates increase with personal consumption.[3][4]

History

Consumption taxes, specifically excise taxes, have featured in several notable historic events. In the U.S., the stamp tax, the tax on tea, and whisky taxes produced revolts, the first two against the British government and the latter against the nascent American Republic. In India, an excise tax on salt led to Gandhi‘s famous Salt Satyagraha, a seminal moment in his struggle to win independence from the U.K.

United States

In the early U.S., taxes were levied principally on consumption. Alexander Hamilton, one of the two chief authors of the anonymous The Federalist Papers, favored consumption taxes in part because they are harder to raise to “confiscatory” levels than incomes taxes.[5] In The Federalist Papers (No. 21), Hamilton wrote:

It is a signal advantage of taxes on articles of consumption that they contain in their own nature a security against excess. They prescribe their own limit, which cannot be exceeded without defeating the end proposed—that is, an extension of the revenue. When applied to this object, the saying is as just as it is witty that, “in political arithmetic, two and two do not always make four.” If duties are too high, they lessen the consumption; the collection is eluded; and the product to the treasury is not so great as when they are confined within proper and moderate bounds. This forms a complete barrier against any material oppression of the citizens by taxes of this class, and is itself a natural limitation of the power of imposing them.[6]

Although personal and corporate income taxes provide the bulk of revenue to the federal government, consumption taxes continue to be a primary source of income for state and local governments. One of the first detailed proposals of a personal consumption tax was developed in 1974 by William Andrews.[7]

Japan

The Liberal Democratic Party government of Masayoshi Ōhira had attempted to introduce a consumption tax in 1979. Ohira met a lot of opposition within his own party and gave up on his attempt after his party suffered badly in the 1979 election. Ten years later Noboru Takeshita successfully negotiated with politicians, bureaucrats, business and labor unions to introduce a consumption tax,[8] which was introduced at a rate of 3% consumption tax in 1989.

Prime Minister Junichiro Koizumi said he had no intention of raising the tax during his government, but after his massive victory in the 2005 election he lifted a ban on discussing it.[15] Over the following years a number of LDP politicians discussed raising it further, including prime ministers Shinzō Abe,[16]Yasuo Fukuda,[17] and Tarō Asō.[18]

The Democratic Party of Japan (now the DP) came to power in the August 2009 elections with a promise not to raise the consumption tax for four years.[19] The first DPJ prime minister, Yukio Hatoyama was opposed, but Naoto Kan replaced him and called for the consumption tax to be raised. The following prime minister, Yoshihiko Noda “staked his political life” on raising the tax.[20] Despite an internal battle that saw former DPJ leader and co-founder Ichirō Ozawa and many other DPJ diet members vote against the bill and then leave the party; on June 26, 2012, the lower house of the Japanese diet passed a bill to double the tax to 10%.[21]

Despite considerable opposition and an attempted no-confidence motion from minor opposition parties the bill was successfully passed through the upper house on August 10, 2012, so the tax was increased to 8% by April 2014 and will be increased to 10% by October 2019 (twice postponed from the original date of October 2015).[22][23]

Savings effect

Consumption taxes do not tax savings, which allows invested assets to grow more quickly. If, in the absence of taxes, $1 of savings is put aside for retirement at 9% compound interest, savings will grow to $7.86 after 24 years. Alternatively, by assuming a 33% tax rate, the same $1 is reduced to about $0.67 after taxes when earned. The effective interest rate, thereafter, is reduced to 6%, since the rest of the yield is paid in taxes.

After 24 years, the balance increases only to $2.64. The cumulative taxes in the latter case are $0.96. The missing $4.26 is not lost by the economy in any sense, as the $4.26 is what the government would make in interest, if they invested their tax revenue. If the initial investment amount is not taxed when earned, but the earnings are taxed thereafter, the cumulative taxes paid are about the same, but are spread more evenly across the period and the asset grows to more than $4. These results are primarily sensitive to the rate of return. With a 3% return, most of the tax receipts come from the tax on the initial $1.00.

To the extent that taxing something results in less of it (whether income or consumption), taxing consumption instead of income should encourage both work and capital formation, which will increase economic growth, while discouraging consumption.[3][4] Secondly, the tax base will be larger because all consumption will be taxed.

Some critics argue that sales and consumption taxes can shift the tax burden to the less well-off. The ratio of tax obligation shrinks as wealth grows because the wealthy spend proportionally less of their income on consumables.[24] An individual unable to save will pay taxes on 100%, but individuals who save or invest a portion of their income will be taxed only on the remaining income.

Practical considerations

Many proposed consumption taxes share some features with the current income tax systems. Under these proposals, taxpayers would be given exemptions and a standard deduction in order to ensure that the poor do not pay any tax. In a pure consumption tax, other deductions would not be permitted, because all savings would be deductible.[3]

A withholding system might also be put into place in order to estimate the total tax liability. It would be difficult for many taxpayers to pay no tax all year, only to be faced with a large tax bill at the end of the year.

A consumption tax could also eliminate the concept of basis when computing the value of investments. All income that is put in investments (such as property, stocks, savings accounts) is tax-free. As the asset grows in value, it is not taxed. Only when the proceeds from the asset are spent is any tax imposed. This is in contrast with the current system where if one buys land for $10,000 and sells it for $15,000, one has a taxable gain of $5,000. A consumption tax taxes only consumption, so if one sells an investment to buy another investment, no tax is imposed.

Andrews notes the inherent problem with housing. Renters necessarily “consume” housing, so they will be taxed on the expenditure of rent. However, homeowners also consume housing in the same way, but as they pay down a mortgage, the payments are classified as savings, not consumption (because equity is being built in an asset).

The disparity is explained by what is known as the imputed rental value of a home. A homeowner could choose to rent the home to others in exchange for money but instead chooses to live in the home to the exclusion of all possible renters. Therefore, the homeowner is also consuming housing by not permitting renters to pay for and occupy the home. The amount of money that the homeowner could receive in rent is the imputed rental value of the home.

A true consumption tax would tax the imputed rental value of the home (which could be determined in the same way that valuation occurs for property tax purposes) and would not tax the increase in the value of the asset (the home). Andrews proposes to ignore this method of taxing imputed rental values because of its complexity. In the United States, home ownership is subsidized by the federal government by permitting a deduction for mortgage interest expense and exempting a significant increase in value from the capital gains tax. Therefore, treating renters and homeowners identically under a consumption tax may not be feasible there.

Also, a consumption tax could utilize progressive rates in order to maintain “fairness.” The more that someone spends on consumption, the more that the person will be taxed. The rate structure could look like the current bracket system, or a new bracket system could be implemented.

Economic impact

The temporal neutrality of a consumption tax, however, is that consumption itself is taxed, so it is irrelevant what good or service is being consumed in terms of allocation of resources. The only possible effect on neutrality is between consumption and savings. Taxing only consumption should, in theory, cause an increase in savings.[3] William Gale, Co-director of the Urban-Brookings Tax Policy Center, offers a simplified way to understand a consumption tax: Assume that our current tax system remains the same but remove limitations to contributing to and removing funds from a traditional Individual Retirement Account (IRA).

Thus, a person would essentially have a bank account where they could place tax-free earnings at any time, but unsaved (or consumed) withdrawals would be subject to taxation. Having an unrestricted IRA under the current system would approximate a consumption tax at the federal level.

Depending on implementation (such as treatment of depreciation) and circumstances, income taxes either favor or disfavor investment. (On the whole, the US system is thought to disfavor investment.[3]) By not disfavoring investment, a consumption tax might increase the capital stock, productivity, and therefore increase the size of the economy.[3][4] Consumption more closely tracks long-run average income.[4] An individual or a family’s income often varies dramatically from year to year. The sale of a home, a one-time job bonus, and various other events can lead to temporary high income that will push a low or middle income person into a high tax bracket. On the other hand, a wealthy individual may be temporarily unemployed and will pay no taxes.

As defined in the proposed legislation, the tax rate is 23% for the first year. This percentage is based on the total amount paid including the tax ($23 out of every $100 spent in total). This would be equivalent to a 30% traditional U.S. sales tax ($23 on top of every $77 spent—$100 total).[4] The rate would automatically adjust annually based on federal receipts in the previous fiscal year.[5] With the rebate taken into consideration, the FairTax would be progressive on consumption,[2] but would also be regressive on income at higher income levels (as consumption falls as a percentage of income).[6][7] Opponents argue this would accordingly decrease the tax burdenon high-income earners and increase it on the middle class.[4][8] Supporters contend that the plan would effectively tax wealth, increase purchasing power[9][10] and decrease tax burdens by broadening the tax base.

Legislative overview and history

The legislation would remove the Internal Revenue Service (after three years), and establish Excise Tax and Sales Tax bureaus in the Department of the Treasury.[16] The states are granted the primary authority for the collection of sales tax revenues and the remittance of such revenues to the Treasury. The plan was created by Americans For Fair Taxation, an advocacy group formed to change the tax system. The group states that, together with economists, it developed the plan and the name “Fair Tax”, based on interviews, polls, and focus groups of the general public.[4] The FairTax legislation has been introduced in the House by Georgia RepublicansJohn Linder (1999–2010) and Rob Woodall (2011–2014),[17] while being introduced in the Senate by Georgia Republican Saxby Chambliss (2003–2014).

To become law, the bill will need to be included in a final version of tax legislation from the U.S. House Committee on Ways and Means, pass both the House and the Senate, and finally be signed by the President. In 2005, President Bush established an advisory panel on tax reform that examined several national sales tax variants including aspects of the FairTax and noted several concerns. These included uncertainties as to the revenue that would be generated, and difficulties of enforcement and administration, which made this type of tax undesirable to recommend in their final report.[8] The panel did not examine the FairTax as proposed in the legislation. The FairTax received visibility in the 2008 presidential election on the issue of taxes and the IRS, with several candidates supporting the bill.[30][31] A poll in 2009 by Rasmussen Reports found that 43% of Americans would support a national sales tax replacement, with 38% opposed to the idea; the sales tax was viewed as fairer by 52% of Republicans, 44% of Democrats, and 49% of unaffiliateds.[32] President Barack Obama did not support the bill,[33] arguing for more progressive changes to the income and payroll tax systems. President Donald Trump has proposed to lower overall income taxation and reduce the number of tax brackets from seven to three.

Tax rate

The sales tax rate, as defined in the legislation for the first year, is 23% of the total payment including the tax ($23 of every $100 spent in total—calculated similar to income taxes). This would be equivalent to a 30% traditional U.S. sales tax ($23 on top of every $77 spent—$100 total, or $30 on top of every $100 spent—$130 total).[4] After the first year of implementation, this rate is automatically adjusted annually using a predefined formula reflecting actual federal receipts in the previous fiscal year.

The effective tax rate for any household would be variable due to the fixed monthly tax rebate that are used to rebate taxes paid on purchases up to the poverty level.[2] The tax would be levied on all U.S. retail sales for personal consumption on new goods and services. Critics argue that the sales tax rate defined in the legislation would not be revenue neutral (that is, it would collect less for the government than the current tax system), and thus would increase the budget deficit, unless government spending were equally reduced.[4]

Sales tax rate

During the first year of implementation, the FairTax legislation would apply a 23% federal retail sales tax on the total transaction value of a purchase; in other words, consumers pay to the government 23 cents of every dollar spent in total (sometimes called tax-inclusive, and presented this way to provide a direct comparison with individual income and employment taxes which reduce a person’s available money before they can make purchases). The equivalent assessed tax rate is 30% if the FairTax is applied to the pre-tax price of a good like traditional U.S. state sales taxes (sometimes called tax-exclusive; this rate is not directly comparable with existing income and employment taxes).[4] After the first year of implementation, this tax rate would be automatically adjusted annually using a formula specified in the legislation that reflects actual federal receipts in the previous fiscal year.[5]

Effective tax rate

A household’s effective tax rate on consumption would vary with the annual expenditures on taxable items and the fixed monthly tax rebate. The rebate would have the greatest effect at low spending levels, where they could lower a household’s effective rate to zero or below.[9] The lowest effective tax rate under the FairTax could be negative due to the rebate for households with annual spending amounts below poverty level spending for a specified household size. At higher spending levels, the rebate has less impact, and a household’s effective tax rate would approach 23% of total spending.[9] A person spending at the poverty level would have an effective tax rate of 0%, whereas someone spending at four times the poverty level would have an effective tax rate of 17.2%. Buying or otherwise receiving items and services not subject to federal taxation (such as a used home or car) can contribute towards a lower effective tax rate. The total amount of spending and the proportion of spending allocated to taxable items would determine a household’s effective tax rate on consumption. If a rate is calculated on income, instead of the tax base, the percentage could exceed the statutory tax rate in a given year.

The annual consumption allowance is based on the 2015 DHHS Poverty Guidelines as published in the Federal Register, January 22, 2015. There is no marriage penalty as the couple amount is twice the amount that a single adult receives. For families/households with more than 8 persons, add $4,160 to the annual consumption allowance for each additional person. The annual consumption allowance is the amount of spending that is “untaxed” under the FairTax.

Under the FairTax, familyhouseholds of lawful U.S. residents would be eligible to receive a “Family Consumption Allowance” (FCA) based on family size (regardless of income) that is equal to the estimated total FairTax paid on poverty level spending according to the poverty guidelines published by the U.S. Department of Health and Human Services.[1] The FCA is a tax rebate (known as a “prebate” as it would be an advance) paid in twelve monthly installments, adjusted for inflation. The rebate is meant to eliminate the taxation of household necessities and make the plan progressive.[4] Households would register once a year with their sales tax administering authority, providing the names and social security numbers of each household member.[1] The Social Security Administration would disburse the monthly rebate payments in the form of a paper check via U.S. Mail, an electronic funds transfer to a bank account, or a “smartcard” that can be used like a debit card.[1]

Opponents of the plan criticize this tax rebate due to its costs. Economists at the Beacon Hill Institute estimated the overall rebate cost to be $489 billion (assuming 100% participation).[35] In addition, economist Bruce Bartlett has argued that the rebate would create a large opportunity for fraud,[36] treats children disparately, and would constitute a welfare payment regardless of need.[37]

The President’s Advisory Panel for Federal Tax Reform cited the rebate as one of their chief concerns when analyzing their national sales tax, stating that it would be the largest entitlement program in American history, and contending that it would “make most American families dependent on monthly checks from the federal government”.[8][38] Estimated by the advisory panel at approximately $600 billion, “the Prebate program would cost more than all budgeted spending in 2006 on the Departments of Agriculture, Commerce, Defense, Education, Energy, Homeland Security, Housing and Urban Development, and Interior combined.”[8] Proponents point out that income tax deductions, tax preferences, loopholes, credits, etc. under the current system was estimated at $945 billion by the Joint Committee on Taxation.[35] They argue this is $456 billion more than the FairTax “entitlement” (tax refund) would spend to cover each person’s tax expenses up to the poverty level. In addition, it was estimated for 2005 that the Internal Revenue Service was already sending out $270 billion in refund checks.[35]

Presentation of tax rate

Mathematically, a 23% tax out of $100 yields approximately the same as a 30% tax on $77.

Sales and income taxes behave differently due to differing definitions of tax base, which can make comparisons between the two confusing. Under the existing individual income plus employment (Social Security; Medicare; Medicaid) tax formula, taxes to be paid are included in the base on which the tax rate is imposed (known as tax-inclusive). If an individual’s gross income is $100 and the sum of their income plus employment tax rate is 23%, taxes owed equals $23. Traditional state sales taxes are imposed on a tax base equal to the pre-tax portion of a good’s price (known as tax-exclusive). A good priced at $77 with a 30% sales tax rate yields $23 in taxes owed. To adjust an inclusive rate to an exclusive rate, divide the given rate by one minus that rate (i.e. {\displaystyle 0.23/(1-0.23)=0.23/0.77=0.30}).

The FairTax statutory rate, unlike most U.S. state-level sales taxes, is presented on a tax base that includes the amount of FairTax paid. For example, a final after-tax price of $100 includes $23 of taxes. Although no such requirement is included in the text of the legislation, Congressman John Linder has stated that the FairTax would be implemented as an inclusive tax, which would include the tax in the retail price, not added on at checkout—an item on the shelf for five dollars would be five dollars total.[29][39] The legislation requires the receipt to display the tax as 23% of the total.[40] Linder states the FairTax is presented as a 23% tax rate for easy comparison to income and employment tax rates (the taxes it would be replacing). The plan’s opponents call the semantics deceptive. FactCheck called the presentation misleading, saying that it hides the real truth of the tax rate.[41]Bruce Bartlett stated that polls show tax reform support is extremely sensitive to the proposed rate,[37] and called the presentation confusing and deceptive based on the conventional method of calculating sales taxes.[42] Proponents believe it is both inaccurate and misleading to say that an income tax is 23% and the FairTax is 30% as it implies that the sales tax burden is higher.

Revenue neutrality

A key question surrounding the FairTax is whether the tax has the ability to be revenue-neutral; that is, whether the tax would result in an increase or reduction in overall federal tax revenues. Economists, advisory groups, and political advocacy groups disagree about the tax rate required for the FairTax to be truly revenue-neutral. Various analysts use different assumptions, time-frames, and methods resulting in dramatically different tax rates making direct comparison among the studies difficult. The choice between static or dynamic scoring further complicates any estimate of revenue-neutral rates.[43]

A 2006 study published in Tax Notes by the Beacon Hill Institute at Suffolk University and Dr. Laurence Kotlikoff estimated the FairTax would be revenue-neutral for the tax year 2007 at a rate of 23.82% (31.27% tax-exclusive).[44] The study states that purchasing power is transferred to state and local taxpayers from state and local governments. To recapture the lost revenue, state and local governments would have to raise tax rates or otherwise change tax laws in order to continue collecting the same real revenues from their taxpayers.[38][44] The Argus Group and Arduin, Laffer & Moore Econometrics each published an analysis that defended the 23% rate.[45][46][47] While proponents of the FairTax concede that the above studies did not explicitly account for tax evasion, they also claim that the studies did not altogether ignore tax evasion under the FairTax. These studies presumably incorporated some degree of tax evasion in their calculations by using National Income and Product Account based figures, which is argued to understate total household consumption.[44] The studies also did not account for capital gains that may be realized by the U.S. government if consumer prices were allowed to rise, which would reduce the real value of nominal U.S. government debt.[44] Nor did these studies account for any increased economic growth that many economists researching the plan believe would occur.[44][47][48][49]

In contrast to the above studies, William G. Gale of the Brookings Institution published a study in Tax Notes that estimated a rate of 28.2% (39.3% tax-exclusive) for 2007 assuming full taxpayer compliance and an average rate of 31% (44% tax-exclusive) from 2006 to 2015 (assumes that the Bush tax cuts expire on schedule and accounts for the replacement of an additional $3 trillion collected through the Alternative Minimum Tax).[4][15][50] The study also concluded that if the tax base were eroded by 10% due to tax evasion, tax avoidance, and/or legislative adjustments, the average rate would be 34% (53% tax-exclusive) for the 10-year period. A dynamic analysis in 2008 by the Baker Institute For Public Policy concluded that a 28% (38.9% tax-exclusive) rate would be revenue neutral for 2006.[51] The President’s Advisory Panel for Federal Tax Reform performed a 2006 analysis to replace the individual and corporate income tax with a retail sales tax and estimated the rate to be 25% (34% tax-exclusive) assuming 15% tax evasion, and 33% (49% tax-exclusive) with 30% tax evasion.[8] The rate would need to be substantially higher to replace the additional taxes replaced by the FairTax (payroll, estate, and gift taxes). Several economists criticized the President’s Advisory Panel’s study as having allegedly altered the terms of the FairTax, using unsound methodology, and/or failing to fully explain their calculations.[35][44][52]

A good would be considered “used” and not taxable if a consumer already owns it before the FairTax takes effect or if the FairTax has been paid previously on the good, which may be different from the item being sold previously. Personal services such as health care, legal services, financial services, and auto repairs would be subject to the FairTax, as would renting apartments and other real property.[4] Food, clothing, prescription drugs and medical services would be taxed. (State sales taxes generally exempt these types of basic-need items in an effort to reduce the tax burden on low-income families. The FairTax would use a monthly rebate system instead of the common state exclusions.) Internet purchases would be taxed, as would retail international purchases (such as a boat or car) that are imported to the United States (collected by the U.S. Customs and Border Protection).[53]

Distribution of tax burden

Boston University study of the FairTax. Lower rates claimed on workers from a larger tax base, replacing regressive taxes, and wealth taxation.

President’s Advisory Panel’sanalysis of a hybrid National Sales Tax. Higher rates claimed on the middle-class for an income tax replacement (excludes payroll, estate, and gift taxes replaced under the FairTax).

The FairTax’s effect on the distribution of taxation or tax incidence (the effect on the distribution of economic welfare) is a point of dispute. The plan’s supporters argue that the tax would broaden the tax base, that it would be progressive, and that it would decrease tax burdens and start taxing wealth (reducing the economic gap).[9] Opponents argue that a national sales tax would be inherently regressive and would decrease tax burdens paid by high-income individuals.[4][54] A person earning $2 million a year could live well spending $1 million, and as a result pay a mere 11% of that year’s income in taxes.[4] Households at the lower end of the income scale spend almost all their income, while households at the higher end are more likely to devote a portion of income to saving. Therefore, according to economist William G. Gale, the percentage of income taxed is regressive at higher income levels (as consumption falls as a percentage of income).[6]

Income earned and saved would not be taxed until spent under the proposal. Households at the extreme high end of consumption often finance their purchases out of savings, not income.[6][37] Economist Laurence Kotlikoff states that the FairTax could make the tax system much more progressive and generationally equitable,[2] and argues that taxing consumption is effectively the same as taxing wages plus taxing wealth.[2] A household of three persons (this example will use two adults plus one child; the rebate does not consider marital status) spending $30,000 a year on taxable items would devote about 3.4% of total spending ([$6,900 tax minus $5,888 rebate]/$30,000 spending) to the FairTax after the rebate. The same household spending $125,000 on taxable items would spend around 18.3% ([$28,750 tax minus $5,888 rebate]/$125,000 spending) on the FairTax. At higher spending levels, the rebate has less impact and the rate approaches 23% of total spending. Thus, according to economist Laurence Kotlikoff, the effective tax rate is progressive on consumption.[2]

Studies by Kotlikoff and David Rapson state that the FairTax would significantly reduce marginal taxes on work and saving, lowering overall average remaining lifetime tax burdens on current and future workers.[9][55] A study by Kotlikoff and Sabine Jokisch concluded that the long-term effects of the FairTax would reward low-income households with 26.3% more purchasing power, middle-income households with 12.4% more purchasing power, and high-income households with 5% more purchasing power.[10] The Beacon Hill Institute reported that the FairTax would make the federal tax system more progressive and would benefit the average individual in almost all expenditures deciles.[7] In another study, they state the FairTax would offer the broadest tax base (an increase of over $2 trillion), which allows the FairTax to have a lower tax rate than current tax law.[56]

Gale analyzed a national sales tax (though different from the FairTax in several aspects[7][45]) and reported that the overall tax burden on middle-income Americans would increase while the tax burden on the top 1% would drop.[6] A study by the Beacon Hill Institute reported that the FairTax may have a negative effect on the well-being of mid-income earners for several years after implementation.[49] According to the President’s Advisory Panel for Federal Tax Reform report, which compared the individual and corporate income tax (excluding other taxes the FairTax replaces) to a sales tax with rebate,[8][35] the percentage of federal taxes paid by those earning from $15,000–$50,000 would rise from 3.6% to 6.7%, while the burden on those earning more than $200,000 would fall from 53.5% to 45.9%.[8] The report states that the top 5% of earners would see their burden decrease from 58.6% to 37.4%.[8][57]FairTax supporters argue that replacing the regressive payroll tax (a 15.3% total tax not included in the Tax Panel study;[8] payroll taxes include a 12.4% Social Security tax on wages up to $97,500 and a 2.9% Medicare tax, a 15.3% total tax that is often split between employee and employer) greatly changes the tax distribution, and that the FairTax would relieve the tax burden on middle-class workers.[2][52]

Predicted effects

The predicted effects of the FairTax are a source of disagreement among economists and other analysts.[41][42][54] According to Money magazine, while many economists and tax experts support the idea of a consumption tax, many of them view the FairTax proposal as having serious problems with evasion and revenue neutrality.[4] Some economists argue that a consumption tax (the FairTax is one such tax) would have a positive effect on economic growth, incentives for international business to locate in the U.S., and increased U.S. international competitiveness (border tax adjustment in global trade).[11][12][13] The FairTax would be tax-free on mortgage interest (up to a basic interest rate) and donations, but some lawmakers have concerns about losing tax incentives on home ownership and charitable contributions.[58] There is also concern about the effect on the income tax industry and the difficulty of repealing the Sixteenth Amendment (to prevent Congress from re-introducing an income tax).[59]

Economic

Americans For Fair Taxation states the FairTax would boost the United States economy and offers a letter signed by eighty economists, including Nobel LaureateVernon L. Smith, that have endorsed the plan.[12] The Beacon Hill Institute estimated that within five years real GDP would increase 10.7% over the current system, domestic investment by 86.3%, capital stock by 9.3%, employment by 9.9%, real wages by 10.2%, and consumption by 1.8%.[49]Arduin, Laffer & Moore Econometrics projected the economy as measured by GDP would be 2.4% higher in the first year and 11.3% higher by the 10th year than it would otherwise be.[47] Economists Laurence Kotlikoff and Sabine Jokisch reported the incentive to work and save would increase; by 2030, the economy’s capital stock would increase by 43.7% over the current system, output by 9.4%, and real wages by 11.5%.[10] Economist John Golob estimates a consumption tax, like the FairTax, would bring long-term interest rates down by 25–35%.[60] An analysis in 2008 by the Baker Institute For Public Policyindicated that the plan would generate significant overall macroeconomic improvement in both the short and long-term, but warned of transitional issues.[51]

FairTax proponents argue that the proposal would provide tax burden visibility and reduce compliance and efficiency costs by 90%, returning a large share of money to the productive economy.[2] The Beacon Hill Institute concluded that the FairTax would save $346.51 billion in administrative costs and would be a much more efficient taxation system.[61]Bill Archer, former head of the House Ways and Means Committee, asked Princeton University Econometrics to survey 500 European and Asian companies regarding the effect on their business decisions if the United States enacted the FairTax. 400 of those companies stated they would build their next plant in the United States, and 100 companies said they would move their corporate headquarters to the United States.[62] Supporters argue that the U.S. has the highest combined statutory corporate income tax rate among OECD countries along with being the only country with no border adjustment element in its tax system.[63][64] Proponents state that because the FairTax eliminates corporate income taxes and is automatically border adjustable, the competitive tax advantage of foreign producers would be eliminated, immediately boosting U.S. competitiveness overseas and at home.[65]

Opponents point to a study commissioned by the National Retail Federation in 2000 that found a national sales tax bill filed by Billy Tauzin, the Individual Tax Freedom Act (H.R. 2717), would bring a three-year decline in the economy, a four-year decline in employment and an eight-year decline in consumer spending.[66]Wall Street Journal columnist James Taranto states the FairTax is unsuited to take advantage of supply-side effects and would create a powerful disincentive to spend money.[54] John Linder states an estimated $11 trillion is held in foreign accounts (largely for tax purposes), which he states would be repatriated back to U.S. banks if the FairTax were enacted, becoming available to U.S. capital markets, bringing down interest rates, and otherwise promoting economic growth in the United States.[11] Attorney Allen Buckley states that a tremendous amount of wealth was already repatriated under law changes in 2004 and 2005.[67] Buckley also argues that if the tax rate was significantly higher, the FairTax would discourage the consumption of new goods and hurt economic growth.[67]

Transition

During the transition, many or most of the employees of the IRS (105,978 in 2005)[68] would face loss of employment.[44] The Beacon Hill Institute estimate is that the federal government would be able to cut $8 billion from the IRS budget of $11.01 billion (in 2007), reducing the size of federal tax administration by 73%.[44] In addition, income tax preparers (many seasonal), tax lawyers, tax compliance staff in medium-to-large businesses, and software companies which sell tax preparation software could face significant drops, changes, or loss of employment. The bill would maintain the IRS for three years after implementation before completely decommissioning the agency, providing employees time to find other employment.[16]

In the period before the FairTax is implemented, there could be a strong incentive for individuals to buy goods without the sales tax using credit. After the FairTax is in effect, the credit could be paid off using untaxed payroll. If credit incentives do not change, opponents of the FairTax worry it could exacerbate an existing consumer debt problem. Proponents of the FairTax state that this effect could also allow individuals to pay off their existing (pre-FairTax) debt more quickly,[11] and studies suggest lower interest rates after FairTax passage.[60]

Individuals under the current system who accumulated savings from ordinary income (by choosing not to spend their money when the income was earned) paid taxes on that income before it was placed in savings (such as a Roth IRA or CD). When individuals spend above the poverty level with money saved under the current system, that spending would be subject to the FairTax. People living through the transition may find both their earnings and their spending taxed.[69] Critics have stated that the FairTax would result in unfair double taxation for savers and suggest it does not address the transition effect on some taxpayers who have accumulated significant savings from after-tax dollars, especially retirees who have finished their careers and switched to spending down their life savings.[38][69] Supporters of the plan argue that the current system is no different, since compliance costs and “hidden taxes” embedded in the prices of goods and services cause savings to be “taxed” a second time already when spent.[69] The rebate would supplement accrued savings, covering taxes up to the poverty level. The income taxes on capital gains, estates, social security and pension benefits would be eliminated under FairTax. In addition, the FairTax legislation adjusts Social Security benefits for changes in the price level, so a percentage increase in prices would result in an equal percentage increase to Social Security income.[16] Supporters suggest these changes would offset paying the FairTax under transition conditions.[11]

If the FairTax bill were passed, permanent elimination of income taxation would not be guaranteed; the FairTax bill would repeal much of the existing tax code, but the Sixteenth Amendment would remain in place. Preventing new legislation from reintroducing income taxation would require a repeal of the Sixteenth Amendment to the United States Constitution with a separate provision expressly prohibiting a federal income tax.[59] This is referred to as an “aggressive repeal”. Separate income taxes enforced by individual states would be unaffected by the federal repeal. Passing the FairTax would require only a simple majority in each house of the United States Congress along with the signature of the President, whereas enactment of a constitutional amendment must be approved by two thirds of each house of the Congress, and three-quarters of the individual U.S. states. It is therefore possible that passage of the FairTax bill would simply add another taxation system. If a new income tax bill were passed after the FairTax passage, a hybrid system could develop; albeit, there is nothing preventing a bill for a hybrid system today. To address this issue and preclude that possibility, in the 111th Congress John Linder introduced a contingent sunset provision in H.R. 25. It would require the repeal of the Sixteenth Amendment within 8 years after the implementation of the FairTax or, failing that, the FairTax would expire.[73] Critics have also argued that a tax on state government consumption could be unconstitutional.[67]

Changes in the retail economy

Since the FairTax would not tax used goods, the value would be determined by the supply and demand in relation to new goods.[74] The price differential/margins between used and new goods would stay consistent, as the cost and value of used goods are in direct relationship to the cost and value of the new goods. Because the U.S. tax system has a hidden effect on prices, it is expected that moving to the FairTax would decrease production costs from the removal of business taxes and compliance costs, which is predicted to offset a portion of the FairTax effect on prices.[11]

Value of used goods

Since the FairTax would not tax used goods, some critics have argued that this would create a differential between the price of new and used goods, which may take years to equalize.[37] Such a differential would certainly influence the sale of new goods like vehicles and homes. Similarly, some supporters have claimed that this would create an incentive to buy used goods, creating environmental benefits of re-use and re-sale. Conversely, it is argued that like the income tax system that contains embedded tax cost (see Theories of retail pricing),[75] used goods would contain the embedded FairTax cost.[69] While the FairTax would not be applied to the retail sales of used goods, the inherent value of a used good includes the taxes paid when the good was sold at retail. The value is determined by the supply and demand in relation to new goods.[74] The price differential / margins between used and new goods should stay consistent, as the cost and value of used goods are in direct relationship to the cost and value of the new goods.

Theories of retail pricing

Based on a study conducted by Dale Jorgenson, proponents state that production cost of domestic goods and services could decrease by approximately 22% on average after embedded tax costs are removed, leaving the sale nearly the same after taxes. The study concludes that producer prices would drop between 15% and 26% (depending on the type of good/service).[76] Jorgenson’s research included all income and payroll taxes in the embedded tax estimation, which assumes employee take-home pay (net income) remains unchanged from pre-FairTax levels.[4][77] Price and wage changes after the FairTax would largely depend on the response of the Federal Reservemonetary authorities.[29][37][78] Non-accommodation of the money supply would suggest retail prices and take home pay stay the same—embedded taxes are replaced by the FairTax. Full accommodation would suggest prices and incomes rise by the exclusive rate (i.e., 30%)—embedded taxes become windfall gains. Partial accommodation would suggest a varying degree in-between.[29][78]

If businesses provided employees with gross pay (including income tax withholding and the employee share of payroll taxes),[44]Arduin, Laffer & Moore Econometrics estimated production costs could decrease by a minimum of 11.55% (partial accommodation).[47] This reduction would be from the removal of the remaining embedded costs, including corporate taxes, compliance costs, and the employer share of payroll taxes. This decrease would offset a portion of the FairTax amount reflected in retail prices, which proponents suggest as the most likely scenario.[29] Bruce Bartlett states that it is unlikely that nominal wages would be reduced, which he believes would result in a recession, but that the Federal Reserve would likely increase the money supply to accommodate price increases.[37] David Tuerck states “The monetary authorities would have to consider how the degree of accommodation, varying from none to full, would affect the overall economy and how it would affect the well-being of various groups such as retirees.”[78]

Social Security benefits would be adjusted for any price changes due to FairTax implementation.[16] The Beacon Hill Institute states that it would not matter, apart from transition issues, whether prices fall or rise—the relative tax burden and tax rate remains the same.[44] Decreases in production cost would not fully apply to imported products; so according to proponents, it would provide tax advantages for domestic production and increase U.S. competitiveness in global trade (see Border adjustability). To ease the transition, U.S. retailers will receive a tax credit equal to the FairTax on their inventory to allow for quick cost reduction. Retailers would also receive an administrative fee equal to the greater of $200 or 0.25% of the remitted tax as compensation for compliance costs,[79] which amounts to around $5 billion.

Effects on tax code compliance

One avenue for non-compliance is the black market. FairTax supporters state that the black market is largely untaxed under the current tax system. Economists estimate the underground economy in the United States to be between one and three trillion dollars annually.[80][81] By imposing a sales tax, supporters argue that black market activity would be taxed when proceeds from such activity are spent on legal consumption.[82] For example, the sale of illegal narcotics would remain untaxed (instead of being guilty of income tax evasion, drug dealers would be guilty of failing to submit sales tax), but they would face taxation when they used drug proceeds to buy consumer goods such as food, clothing, and cars. By taxing this previously untaxed money, FairTax supporters argue that non-filers would be paying part of their share of what would otherwise be uncollected income and payroll taxes.[11][83]

Other economists and analysts have argued that the underground economy would continue to bear the same tax burden as before.[13][82][83][84] They state that replacing the current tax system with a consumption tax would not change the tax revenue generated from the underground economy—while illicit income is not taxed directly, spending of income from illicit activity results in business income and wages that are taxed.[13][82][83]

Tax compliance and evasion

Proponents state the FairTax would reduce the number of tax filers by about 86% (from 100 million to 14 million) and reduce the filing complexity to a simplified state sales tax form.[52] The Government Accountability Office (GAO), among others, have specifically identified the negative relationship between compliance costs and the number of focal points for collection.[85] Under the FairTax, the federal government would be able to concentrate tax enforcement efforts on a single tax. Retailers would receive an administrative fee equal to the greater of $200 or 0.25% of the remitted tax as compensation for compliance costs.[79] In addition, supporters state that the overwhelming majority of purchases occur in major retail outlets, which are very unlikely to evade the FairTax and risk losing their business licenses.[44] Economic Census figures for 2002 show that 48.5% of merchandise sales are made by just 688 businesses (“Big-Box” retailers). 85.7% of all retail sales are made by 92,334 businesses, which is 3.6% of American companies. In the service sector, approximately 80% of sales are made by 1.2% of U.S. businesses.[29]

The FairTax is a national tax, but can be administered by the states rather than a federal agency,[86] which may have a bearing on compliance as the states’ own agencies could monitor and audit businesses within that state. The 0.25% retained by the states amounts to $5 billion the states would have available for enforcement and administration. For example, California should receive over $500 million for enforcement and administration, which is more than the $327 million budget for the state’s sales and excise taxes.[87] Because the federal money paid to the states would be a percentage of the total revenue collected, John Linder claims the states would have an incentive to maximize collections.[11] Proponents believe that states that choose to conform to the federal tax base would have advantages in enforcement, information sharing, and clear interstate revenue allocation rules.[85][86] A study by the Beacon Hill Institute concluded that, on average, states could more than halve their sales tax rates and that state economies would benefit greatly from adopting a state-level FairTax.[85]

FairTax opponents state that compliance decreases when taxes are not automatically withheld from citizens, and that massive tax evasion could result by collecting at just one point in the economic system.[37] Compliance rates can also fall when taxed entities, rather than a third party, self-report their tax liability. For example, ordinary personal income taxes can be automatically withheld and are reported to the government by a third party. Taxes without withholding and with self-reporting, such as the FairTax, can see higher evasion rates. Economist Jane Gravelle of the Congressional Research Service found studies showing that evasion rates of sales taxes are often above 10%, even when the sales tax rate is in the single digits.[83] Tax publications by the Organisation for Economic Co-operation and Development (OECD), IMF, and Brookings Institution have suggested that the upper limit for a sales tax is about 10% before incentives for evasion become too great to control.[37] According to the GAO, 80% of state tax officials opposed a national sales tax as an intrusion on their tax base.[37] Opponents also raise concerns of legal tax avoidance by spending and consuming outside of the U.S. (imported goods would be subject to collection by the U.S. Customs and Border Protection).[88]

Economists from the University of Tennessee concluded that while there would be many desirable macroeconomic effects, adoption of a national retail sales tax would also have serious effects on state and local government finances.[89] Economist Bruce Bartlett stated that if the states did not conform to the FairTax, they would have massive confusion and complication as to what is taxed by the state and what is taxed by the federal government.[37] In addition, sales taxes have long exempted all but a few services because of the enormous difficulty in taxing intangibles—Bartlett suggests that the state may not have sufficient incentive to enforce the tax.[42]University of Michigan economist Joel Slemrod argues that states would face significant issues in enforcing the tax. “Even at an average rate of around five percent, state sales taxes are difficult to administer.”[90] University of Virginia School of Law professor George Yin states that the FairTax could have evasion issues with export and import transactions.[38] The President’s Advisory Panel for Federal Tax Reformreported that if the federal government were to cease taxing income, states might choose to shift their revenue-raising to income.[8] Absent the Internal Revenue Service, it would be more difficult for the states to maintain viable income tax systems.[8][89]

Underground economy

Opponents of the FairTax argue that imposing a national retail sales tax would drive transactions underground and create a vast underground economy.[4] Under a retail sales tax system, the purchase of intermediate goods and services that are factors of production are not taxed, since those goods would produce a final retail good that would be taxed. Individuals and businesses may be able to manipulate the tax system by claiming that purchases are for intermediate goods, when in fact they are final purchases that should be taxed. Proponents point out that a business is required to have a registered seller’s certificate on file, and must keep complete records of all transactions for six years. Businesses must also record all taxable goods bought for seven years. They are required to report these sales every month (see Personal vs. business purchases).[40] The government could also stipulate that all retail sellers provide buyers with a written receipt, regardless of transaction type (cash, credit, etc.), which would create a paper trail for evasion with risk of having the buyer turn them in (the FairTax authorizes a reward for reporting tax cheats).[52]

While many economists and tax experts support a consumption tax, problems could arise with using a retail sales tax rather than a value added tax (VAT).[4][37] A VAT imposes a tax on the value added at every intermediate step of production, so the goods reach the final consumer with much of the tax already in the price.[91] The retail seller has little incentive to conceal retail sales, since he has already paid much of the good’s tax. Retailers are unlikely to subsidize the consumer’s tax evasion by concealing sales. In contrast, a retailer has paid no tax on goods under a sales tax system. This provides an incentive for retailers to conceal sales and engage in “tax arbitrage” by sharing some of the illicit tax savings with the final consumer. Citing evasion, Tim Worstall wrote in Forbes that Europe’s 20-25% consumption taxes simply would not work if they were a sales tax: that’s why they’re all a VAT.[91]Laurence Kotlikoff has stated that the government could compel firms to report, via 1099-type forms, their sales to other firms, which would provide the same records that arise under a VAT.[52] In the United States, a general sales tax is imposed in 45 states plus the District of Columbia (accounting for over 97% of both population and economic output), which proponents argue provides a large infrastructure for taxing sales that many countries do not have.

Personal versus business purchases

Businesses would be required to submit monthly or quarterly reports (depending on sales volume) of taxable sales and sales tax collected on their monthly sales tax return. During audits, the business would have to produce invoices for the “business purchases” that they did not pay sales tax on, and would have to be able to show that they were genuine business expenses.[40] Advocates state the significant 86% reduction in collection points would greatly increase the likelihood of business audits, making tax evasion behavior much more risky.[52] Additionally, the FairTax legislation has several fines and penalties for non-compliance, and authorizes a mechanism for reporting tax cheats to obtain a reward.[40] To prevent businesses from purchasing everything for their employees, in a family business for example, goods and services bought by the business for the employees that are not strictly for business use would be taxable.[40] Health insurance or medical expenses would be an example where the business would have to pay the FairTax on these purchases. Taxable property and services purchased by a qualified non-profit or religious organization “for business purposes” would not be taxable.[92]

FairTax movement

The creation of the FairTax began with a group of businessmen from Houston, Texas, who initially financed what has become the political advocacy group Americans For Fair Taxation (AFFT), which has grown into a large tax reform movement.[3][29] This organization, founded in 1994, claims to have spent over $20 million in research, marketing, lobbying, and organizing efforts over a ten-year period and is seeking to raise over $100 million more to promote the plan.[93] AFFT includes a staff in Houston and a large group of volunteers who are working to get the FairTax enacted.

In 2007 Bruce Bartlett said the FairTax was devised by the Church of Scientology in the early 1990s,[42] drawing comparisons between the tax policy and religious doctrine from the faith, whose creation myth holds that an evil alien ruler known as Xenu “used phony tax inspections as a guise for destroying his enemies.”[94] Representative John Linder told the Atlanta Journal-Constitution that Bartlett confused the FairTax movement with the Scientology-affiliated Citizens for an Alternative Tax System,[95] which also seeks to abolish the federal income tax and replace it with a national retail sales tax. Leo Linbeck, AFFT Chairman and CEO, stated “As a founder of Americans For Fair Taxation, I can state categorically, however, that Scientology played no role in the founding, research or crafting of the legislation giving expression to the FairTax.”[93]

Much support has been achieved by talk radio personality Neal Boortz.[96] Boortz’s book (co-authored by Georgia Congressman John Linder) entitled The FairTax Book, explains the proposal and spent time atop the New York Times Best Seller list. Boortz stated that he donates his share of the proceeds to charity to promote the book.[96] In addition, Boortz and Linder have organized several FairTax rallies to publicize support for the plan. Other media personalities have also assisted in growing grassroots support including former radio and TV talk show host Larry Elder, radio host and former candidate for the 2012 GOP Presidential Nomination Herman Cain, Fox News and radio host Sean Hannity, and Fox Business Host John Stossel.[97] The FairTax received additional visibility as one of the issues in the 2008 presidential election. At a debate on June 30, 2007, several Republican candidates were asked about their position on the FairTax and many responded that they would sign the bill into law if elected.[30] The most vocal promoters of the FairTax during the 2008 primary elections were Republican candidate Mike Huckabee and Democratic candidate Mike Gravel. The Internet, blogosphere, and electronic mailing lists have contributed to promoting, organizing, and gaining support for the FairTax. In the 2012 Republican presidential primary, and his ensuing Libertarian Party presidential run, former Governor of New Mexico and businessman Gary Johnson actively campaigned for the FairTax.[98] Former CEO of Godfather’s PizzaHerman Cain has been promoting the FairTax as a final step in a multiple-phase tax reform.[99] Outside of the United States, the Christian Heritage Party of Canadaadopted a FairTax proposal as part of their 2011 election platform[100] but won no seats in that election.

Political advocacy

In 1964, Griffin wrote his first book, The Fearful Master, on the United Nations, a topic that recurs throughout his writings. While he describes his work as the output of “a plain vanilla researcher”, Griffin also agrees with the Los Angeles Daily News‘s characterization of him as “Crusader Rabbit“.[9]

Griffin has been a member and officer of the John Birch Society (JBS) for much of his life[10] and a contributing editor to its magazine, The New American.[11] Since the 1960s, Griffin has spoken and written about the Society’s theory of history involving “communist and capitalist conspiracies” over banking systems (including the Federal Reserve System), International banking, United States foreign policy, the U.S. military-industrial complex, the American news and entertainment media as propaganda, the Supreme Court of the United States, and the United Nations.[12][13] From 1962 to 1975, he completed nine books and seven film productions; his 1969 video lecture, More Deadly Than War: The Communist Revolution in America, was printed in English and Dutch. In 1974, he published World Without Cancer, and in 1975, he wrote a sympathetic biography of JBS founder Robert W. Welch.[14][15]

In May 2009, Griffin helped Robert L. Schulz and Edwin Vieira organize a meeting at Jekyll Island of thirty people including “radical tax protesters, militiamen, nativist extremists, anti-Obama ‘birthers,’ hard-line libertarians, conspiracy-minded individuals with theories about secret government concentration camps, even a raging anti-Semite named Edgar Steele“.[16] Speakers at the meeting “warned of ‘increasing national instability,’ worried about a coming ‘New World Order,’ denounced secret schemes to merge Canada, Mexico and the United States, and furiously attacked the new president’s ‘socialized’ policies and failure to end illegal immigration,” and attendees made plans for a “continental congress” that occurred in November 2009 that was hosted by the We the People Foundation.[16] Griffin was the first to speak at the Jekyll Island meeting and he “told conferees that merely putting ‘large numbers of people in the street’ was not enough. ‘We must,’ he said, ‘achieve power.'”[16]

Alternate conspiracy theories and fringe science

The Creature from Jekyll Island

Griffin’s 1994 book, The Creature from Jekyll Island, draws parallels between the Federal Reserve and a bird of prey.

Edward Flaherty, an academic economist writing for Political Research Associates, characterized Griffin’s description of the secret meeting on Jekyll Island as “paranoid”, “amateurish”, and “academically suspect”.[21]

Cancer, chemtrails, and AIDS denial

In 1973, Griffin wrote and self-published the book World Without Cancer and released it as a video;[22][23] its second edition appeared in 1997. In the book and the video, Griffin asserts that cancer is a metabolic disease like a vitamin deficiency facilitated by the insufficient dietary consumption of amygdalin. He contends that “eliminating cancer through a nondrug therapy has not been accepted because of the hidden economic and power agendas of those who dominate the medical establishment”[24] and he wrote, “at the very top of the world’s economic and political pyramid of power there is a grouping of financial, political, and industrial interests that, by the very nature of their goals, are the natural enemies of the nutritional approaches to health”.[25]

Since the 1970s, the use of laetrile to treat cancer has been identified in the scientific literature as a canonical example of quackery and has never been shown to be effective in the treatment or prevention of cancer.[26][27] Emanuel Landau, then a Project Director for the APHA, wrote a book review for the American Journal of Public Health, which noted that Griffin “accepts the ‘conspiracy’ theory … that policy-makers in the medical, pharmaceutical, research and fund-raising organizations deliberately or unconsciously strive not to prevent or cure cancer in order to perpetuate their functions”. Landau concludes that although World Without Cancer “is an emotional plea for the unrestricted use of the Laetrile as an anti-tumor agent, the scientific evidence to justify such a policy does not appear within it”.[28]

In a 2012 video titled “What in the World Are They Spraying?”, Griffin asserts that airplanes leave a permanent grid of chemtrails hanging over cities like Los Angeles.[31]

Noah’s Ark search

In 1992 Griffin wrote and narrated The Discovery of Noah’s Ark, based on David Fasold‘s 1988 book, The Ark of Noah.[5] Griffin’s film said that the original Noah’s Ark continued to exist in fossil form at the Durupınar site, about 17 miles (27 km) from Mount Ararat in Turkey, based on photographic, radar, and metal detector evidence. Griffin also said that towns in the area had names that resembled terms from the Biblical story of the flood. He endorsed the historicity of the Biblical account of the flood, and speculated that the flood was the byproduct of massive tides caused by a gravitational interaction between Earth and a large celestial body coming close to it.[9]

References

^ Jump up to:abcdEaster, Sean (March 26, 2011). “Who is G. Edward Griffin, Beck’s Expert on The Federal Reserve?”. Media Matters for America. Retrieved 2015-03-10. On his Fox News show, Glenn Beck presented Griffin as an authority on the history of the Federal Reserve System. Griffin has a history of holding and promoting various conspiracy hypotheses, whether founded or unfounded, that include notions that question the very existence of HIV/AIDS, as well as the view that the origin of cancer has to do with a specific dietary deficiency, and correspondingly, that cancer can be effectively cured with an ‘essential food compound’.

^ Jump up to:ab“T.O.’s Griffin All Booked Up With Writing, Film Projects”. Daily News of Los Angeles. May 22, 1995. Retrieved 2008-02-29. G. Edward Griffin, author and documentary film producer, calls himself ‘a plain vanilla researcher and writer.’ But the projects he has completed don’t deal with ‘vanilla’ subjects. They concern the Federal Reserve, the Supreme Court, cancer and even Noah’s ark. Perhaps a better description of Griffin is one he also admits to – ‘Crusader Rabbit’. …

^ Jump up to:abcHeidi Beirich. “Midwifing the Militias: Jekyll Island Gathering Recalls Another” (Spring 2010, Issue 137). Southern Poverty Law Center. Retrieved 2015-03-11. G. Edward Griffin, who helped organize the Jekyll Island gathering, may have been more revealing. Griffin, who wrote a scathing 1994 attack on the Fed published by the anti-communist John Birch Society and also a sympathetic biography of the group’s founder, was the first to speak at the meeting. He told conferees that merely putting ‘large numbers of people in the street’ was not enough. ‘We must,’ he said, ‘achieve power’.

Jump up^“The Cancer Cure Foundation”. The Cancer Cure Foundation. Retrieved 2015-03-11. This website provides an unbiased analysis of the major alternative-cancer clinics, treatments and therapies. It explains the theories of how these treatments work and where to locate doctors, practitioners and natural-health clinics. It also provides case histories of patients who have benefited from these non-conventional approaches.

Jump up^“Chemtrails – Conspiracy Theory?”. Australian Science. December 28, 2012. Retrieved 2015-03-11. The filmmakers bring in advocate and conspiracist G. Edward Griffin to join this chemtrail crusade. He talks about how chemtrails don’t dissipate; that a permanent grid hangs over cities like Los Angeles.

Why I Was Fired by Google

James Damore says his good-faith effort to discuss differences between men and women in tech couldn’t be tolerated in company’s ‘ideological echo chamber’

Former Google software engineer James Damore.PHOTO: PETER DUKE

By James Damore

Aug. 11, 2017 3:54 p.m. ET

I was fired by Google this past Monday for a document that I wrote and circulated internally raising questions about cultural taboos and how they cloud our thinking about gender diversity at the company and in the wider tech sector. I suggested that at least some of the male-female disparity in tech could be attributed to biological differences (and, yes, I said that bias against women was a factor too). Google Chief Executive Sundar Pichai declared that portions of my statement violated the company’s code of conduct and “cross the line by advancing harmful gender stereotypes in our workplace.”

My 10-page document set out what I considered a reasoned, well-researched, good-faith argument, but as I wrote, the viewpoint I was putting forward is generally suppressed at Google because of the company’s “ideological echo chamber.” My firing neatly confirms that point. How did Google, the company that hires the smartest people in the world, become so ideologically driven and intolerant of scientific debate and reasoned argument?

We all have moral preferences and beliefs about how the world is and should be. Having these views challenged can be painful, so we tend to avoid people with differing values and to associate with those who share our values. This self-segregation has become much more potent in recent decades. We are more mobile and can sort ourselves into different communities; we wait longer to find and choose just the right mate; and we spend much of our time in a digital world personalized to fit our views.

Google is a particularly intense echo chamber because it is in the middle of Silicon Valley and is so life-encompassing as a place to work. With free food, internal meme boards and weekly companywide meetings, Google becomes a huge part of its employees’ lives. Some even live on campus. For many, including myself, working at Google is a major part of their identity, almost like a cult with its own leaders and saints, all believed to righteously uphold the sacred motto of “Don’t be evil.”

Echo chambers maintain themselves by creating a shared spirit and keeping discussion confined within certain limits. As Noam Chomsky once observed, “The smart way to keep people passive and obedient is to strictly limit the spectrum of acceptable opinion, but allow very lively debate within that spectrum.”

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But echo chambers also have to guard against dissent and opposition. Whether it’s in our homes, online or in our workplaces, a consensus is maintained by shaming people into conformity or excommunicating them if they persist in violating taboos. Public shaming serves not only to display the virtue of those doing the shaming but also warns others that the same punishment awaits them if they don’t conform.

In my document, I committed heresy against the Google creed by stating that not all disparities between men and women that we see in the world are the result of discriminatory treatment. When I first circulated the document about a month ago to our diversity groups and individuals at Google, there was no outcry or charge of misogyny. I engaged in reasoned discussion with some of my peers on these issues, but mostly I was ignored.

Everything changed when the document went viral within the company and the wider tech world. Those most zealously committed to the diversity creed—that all differences in outcome are due to differential treatment and all people are inherently the same—could not let this public offense go unpunished. They sent angry emails to Google’s human-resources department and everyone up my management chain, demanding censorship, retaliation and atonement.

Upper management tried to placate this surge of outrage by shaming me and misrepresenting my document, but they couldn’t really do otherwise: The mob would have set upon anyone who openly agreed with me or even tolerated my views. When the whole episode finally became a giant media controversy, thanks to external leaks, Google had to solve the problem caused by my supposedly sexist, anti-diversity manifesto, and the whole company came under heated and sometimes threatening scrutiny.

It saddens me to leave Google and to see the company silence open and honest discussion. If Google continues to ignore the very real issues raised by its diversity policies and corporate culture, it will be walking blind into the future—unable to meet the needs of its remarkable employees and sure to disappoint its billions of users.

—Mr. Damore worked as a software engineer at Google’s Mountain View campus from 2013 until this past week.

Google has fired the employee who penned a controversial memo on women and tech

The author wrote, among other things, that females suffered from more “neuroticism.”

BY KARA SWISHER@KARASWISHER AUG 7, 2017, 8:46PM EDT

The search giant acts.

In a memo to employees, Google CEO Sundar Pichai said the employee who penned a controversial memo that claimed that women had biological issues that prevented them from being as successful as men in tech had violated its Code of Conduct, and that the post had crossed “the line by advancing harmful gender stereotypes in our workplace.”

He added: “To suggest a group of our colleagues have traits that make them less biologically suited to that work is offensive and not OK.”

Pichai’s wording appears to indicate that the employee is likely be fired, which some inside and outside the company have been calling for. A Google spokesperson said the company would not confirm any firing of an individual employee, but in the past others have been let go for violating its Code of Conduct.

(Update: Sources told Recode that the employee has been fired, but Google said it would not comment on individual employees. The memo’s author also confirmed his firing from the company to Bloomberg.)

Once it does happen — and it should not be long — the move is sure to attract a firestorm of criticism on both sides, putting the search giant in the crosshairs of a wider debate about gender issues taking place in Silicon Valley and across the country.

The employee memo — which was up for days without action by Google — went viral within the search giant’s internal discussion boards this weekend, with some decrying it and others defending it. Sources said the company’s top execs have been struggling with how to deal with it and the fallout, trying to decide if its troubling content crossed a line.

Apparently it did. In a memo to employees titled “Our words matter,” Google CEO Sundar Pichai said that the employee — who has been named on Twitter, although his identity could not be verified — had violated its code of conduct. (I am not publishing his name, because he — and others who disagree with him — have been threatened with violence online.)

Had the employee not belittled women’s skills, I assume, he would not be let go, but he made claims that many consider problematic, although others maintain that his myriad of claims are worthy.

One thing is clear, the memo has become radioactive at Google.

Multiple sources said the memo has caused a massive debate to go on internally, which has devolved in ways not unlike those taking place across the country. “It has been really toxic,” said one person at Google. “It’s a microcosm of America.”

Still, this is a corporation with rules and managers who rule on those rules. So, what is also true is that most free speech is allowed when it comes to the government and within society, but not necessarily within companies. In fact, it is common for people to lose their jobs for making sexist and racist remarks.

That said, Pichai also noted that the memo did raise some important issues, such as the need for more willingness at Google to include more points of view at the company, including more conservative ones.

It’s really a no-win situation for him or anyone, as these issues engender really profound and often ugly disagreement to take place.

But, as Pichai noted, words matter:

“First, let me say that we strongly support the right of Googlers to express themselves, and much of what was in that memo is fair to debate, regardless of whether a vast majority of Googlers disagree with it. However, portions of the memo violate our Code of Conduct and cross the line by advancing harmful gender stereotypes in our workplace. Our job is to build great products for users that make a difference in their lives. To suggest a group of our colleagues have traits that make them less biologically suited to that work is offensive and not OK. It is contrary to our basic values and our Code of Conduct, which expects ‘each Googler to do their utmost to create a workplace culture that is free of harassment, intimidation, bias and unlawful discrimination.’”

On Sunday, Google’s head of diversity, Danielle Brown, said in a memo — her first to the company — that she would not link to the employee’s memo because “it’s not a viewpoint that I or this company endorses, promotes or encourages.”

Google does not have an easy line to walk, especially since the employee penned a piece he sent across the company that posited, among other things, that women were biologically not suited to do tech.

“I value diversity and inclusion, am not denying that sexism exists, and don’t endorse using stereotypes. When addressing the gap in representation in the population, we need to look at population level differences in distributions. If we can’t have an honest discussion about this, then we can never truly solve the problem.”

But then, in what is pretty much the main premise, he went on in detail: “I’m simply stating that the distribution of preferences and abilities of men and women differ in part due to biological causes and that these differences may explain why we don’t see equal representation of women in tech and leadership.”

What followed was a list of those differences, including a claim that women were more social and artistic and could not take the stress of high-pressure jobs. Hence, “neuroticism,” or higher anxiety and lower stress tolerance, which he claimed was backed up by studies.

Perhaps most disingenuously, the author also claimed that he had no voice, even after penning a 3,000-word memo that he was able to send companywide and also was read by millions more.

In other words, he got heard.

“Psychological safety is built on mutual respect and acceptance, but unfortunately our culture of shaming and misrepresentation is disrespectful and unaccepting of anyone outside its echo chamber,” he wrote.

Well, maybe so, but it also looks like it also will lead to more serious consequences for the employee.

Ironically, Google is now hosting a conference on girls in tech.

It is also in the midst of a lawsuit with the Labor Department, which has alleged that Google has a gender gap in pay. The company has denied this, and has declined to provide salary information to the government. But Google, like many tech companies, has released its diversity statistics — men make up almost 70 percent of the staff and a full 80 percent of the technical employees.

Here is the Pichai memo in total — if you want to also read between the lines:

From: Sundar

Subject: Our words matter

This has been a very difficult few days. I wanted to provide an update on the memo that was circulated over this past week.

First, let me say that we strongly support the right of Googlers to express themselves, and much of what was in that memo is fair to debate, regardless of whether a vast majority of Googlers disagree with it. However, portions of the memo violate our Code of Conduct and cross the line by advancing harmful gender stereotypes in our workplace. Our job is to build great products for users that make a difference in their lives. To suggest a group of our colleagues have traits that make them less biologically suited to that work is offensive and not OK. It is contrary to our basic values and our Code of Conduct, which expects “each Googler to do their utmost to create a workplace culture that is free of harassment, intimidation, bias and unlawful discrimination.”

The memo has clearly impacted our co-workers, some of whom are hurting and feel judged based on their gender. Our co-workers shouldn’t have to worry that each time they open their mouths to speak in a meeting, they have to prove that they are not like the memo states, being “agreeable” rather than “assertive,” showing a “lower stress tolerance,” or being “neurotic.”

At the same time, there are co-workers who are questioning whether they can safely express their views in the workplace (especially those with a minority viewpoint). They too feel under threat, and that is also not OK. People must feel free to express dissent. So to be clear again, many points raised in the memo — such as the portions criticizing Google’s trainings, questioning the role of ideology in the workplace, and debating whether programs for women and underserved groups are sufficiently open to all — are important topics. The author had a right to express their views on those topics — we encourage an environment in which people can do this and it remains our policy to not take action against anyone for prompting these discussions.

The past few days have been very difficult for many at the company, and we need to find a way to debate issues on which we might disagree — while doing so in line with our Code of Conduct. I’d encourage each of you to make an effort over the coming days to reach out to those who might have different perspectives from your own. I will be doing the same.

I have been on work related travel in Africa and Europe the past couple of weeks and had just started my family vacation here this week. I have decided to return tomorrow as clearly there’s a lot more to discuss as a group — including how we create a more inclusive environment for all.

So please join me, along with members of the leadership team at a town hall on Thursday. Check your calendar soon for details.

The controversy surrounding the firing of former Google engineer James Damore over an internal diversity memo took another turn late Tuesday, as Damore officially filed a formal complaint with the National Labor Relations Board due to his dismissal from Google. It’s also the latest legal move for Damore, who publicly said he wants to take the search giant to court.

At the moment, Damore’s prospects for a case against Google appear to be uncertain. For Google, the company contends the memo clearly had disruptive and hostile effects within its offices. According to a post from Google CEO Sundar Pichai, the former software engineer’s memo had a negative response among Google’s staffers and, more significantly, portions of the document violated the company’scode of conduct for its employees.

While Google initially struggled to handle the early backlash to the diversity manifesto, the company’s progressive culture eventually guided its response. In past research, Jennifer Chatman, professor of management with the Haas School of Business at the University Of California, Berkeley, found that establishing political correctness norms improved creativity and novel thinking among groups of men and women by removing areas for potential uncertainty.

Chatman told International Business Times that Google’s dismissal of Damore reflected how much the company values maintaining its corporate culture and showed the degree of internal hostility caused by the diversity memo.

“You can have a culture in which people articulate values, but unless those values are actually upheld through supporting behaviors that are aligned with those values and sanctioning those that are not aligned, then you have what I would call a vacuous culture,” Chatman said. “What I think Google is doing is simply standing behind its stated values and that’s indicative of a strong culture. It’s not enough just to have the content, you actually have to enforce the cultural norms.”

Damore’s memo was critical of Google’s approach to diversity hiring and staffing.Photo: Getty

Last week, Damore’s 10-page internal memo blasting Google’s approach to diversity hiring was leaked and initially made public by Motherboard. While Damore initially defends his memo’s focus, writing that he values “diversity and inclusion,” the paper prominently contends that women are not represented at higher levels in the tech industry compared to men because of automatic biological differences.

“Differences in distributions of traits between men and women may in part explain why we don’t have 50 percent representation of women in tech and leadership,” Damore writes. “Discrimination to reach equal representation is unfair, divisive, and bad for business.”

Damore’s memo argues female workers generally tend to be more neurotic and move into less detail-focused fields of work due to how they prefer “people rather than things.” It also touches on the dominance of progressive points of view within Silicon Valley and Damore also said that conservative voices are underrepresented at companies like Google.

For female engineers, coders and other technical employees, the idea that a staffer would openly argue that they were at a disadvantage because of their gender and that other employees supported this viewpoint was likely untenable for Google. As Wired reported, the memo received its share of opposition and support within Google’s internal discussion threads. In his memo, Pichai also defended the right to debate and dissenting opinions within Google, but said the memo’s language crossed a line.

“To suggest a group of our colleagues have traits that make them less biologically suited to that work is offensive and not OK,” Pichai said.

In a blog post, former Google senior engineer Yonatan Zunger also points out the practical concerns of trying to continue to work with an employee with a toxic internal reputation:

And as for its impact on you: Do you understand that at this point, I could not in good conscience assign anyone to work with you? I certainly couldn’t assign any women to deal with this, a good number of the people you might have to work with may simply punch you in the face, and even if there were a group of like-minded individuals I could put you with, nobody would be able to collaborate with them. You have just created a textbook hostile workplace environment.

Legal experts have also dismissed common online opposition to the firing on free speech grounds. As a tech company, Google is a private business that’s not subject to First Amendment guidelines.

Plus, the diversity memo would have be a persistent headache for Google if it had chosen to keep Damore onboard as an employee. According to Richard Ford, professor of law at Stanford Law School, employers have a legal obligation to reject blatant instances of discriminatory behavior in the workplace and the Damore memo would’ve been a clear-cut and publicly documented example of this type of comment.

California law does offer some basic protections against alleged retaliation to political speech, but it typically focuses on organizing and activism done outside of the office. Damore’s potential case could argue that he was engaging in worker-related activism, but Ford told IBT that this would a difficult legal approach to pursue.

“Federal labor law prohibits employers from taking adverse action against employees who engaged in work related organizing advocacy (such as union organizing),” Ford said. “This is probably his best shot, but it is a big stretch: the law is designed to protect labor organizing — not general political expression or general criticism of the employer.”

A Google employee made waves when he wrote a 10-page letter ripping the cultist approach to diversity at the campus where he worked and now he has been sent packing by the Orwellian tech giant which has found him guilty of thought crime and independent thinking, both of which are verboten in corporate America.

James Damore was fired after his epic and courageous communique that called into question Google’s policies on forced diversity, biases and the biological unsuitability of women for certain managerial roles in the high-stress corporate environment.

The memo was strictly Mr. Damore’s personal opinion and he makes a lot of very good points that are taboo in today’s corporate fascist environment in which this humble author has personally toiled in.

Take my word that corporate America is an oppressive environment policed by overzealous human resources goon squads and since the election of Donald Trump as president, has become progressively more intolerant to those with conservative viewpoints. Some corporations are even hiring third parties to aggressively monitor off-work social media use by employees, a clear violation of free speech as well as an exercise in witch hunting.

It’s hard to overstate just how bad that it has gotten in the corporate world today. Office grudges can be turned into career killers based on nothing but accusations in which a white male is guilty until proven innocent which is nearly impossible before a kangaroo court of busybodies and social engineers whose biases are sanctioned at the highest levels.

Damore’s memo was rapidly spun into him being a misogynist and a bigot and drew hate and scorn from the left as well as the personal involvement of Google CEO Sundar Pichai resulting in his termination.

Internet giant Google has fired the male engineer at the center of an uproar in Silicon Valley over the past week after he authored an internal memo asserting there are biological causes behind gender inequality in the tech industry.

James Damore, the engineer who wrote the memo, confirmed his dismissal, saying in an email to Reuters on Monday that he had been fired for “perpetuating gender stereotypes”.

Damore said he was exploring all possible legal remedies, and that before being fired, he had submitted a charge to the U.S. National Labor Relations Board (NLRB) accusing Google upper management of trying to shame him into silence.

“It’s illegal to retaliate against an NLRB charge,” he wrote in the email.

Google, a unit of Alphabet Inc based in Mountain View, Calif., said it could not talk about individual employee cases.

Google Chief Executive Sundar Pichai told employees in a note on Monday that portions of the anti-diversity memo “violate our Code of Conduct and cross the line by advancing harmful gender stereotypes in our workplace,” according to a copy of the note seen by Reuters.

Tech website Gizmodo published the memo in its entirety, read it HERE.

A few excerpts:

I value diversity and inclusion, am not denying that sexism exists, and don’t endorse using stereotypes. When addressing the gap in representation in the population, we need to look at population level differences in distributions. If we can’t have an honest discussion about this, then we can never truly solve the problem. Psychological safety is built on mutual respect and acceptance, but unfortunately our culture of shaming and misrepresentation is disrespectful and unaccepting of anyone outside its echo chamber. Despite what the public response seems to have been, I’ve gotten many personal messages from fellow Googlers expressing their gratitude for bringing up these very important issues which they agree with but would never have the courage to say or defend because of our shaming culture and the possibility of being fired. This needs to change.

AND

People generally have good intentions, but we all have biases which are invisible to us. Thankfully, open and honest discussion with those who disagree can highlight our blind spots and help us grow, which is why I wrote this document. Google has several biases and honest discussion about these biases is being silenced by the dominant ideology. What follows is by no means the complete story, but it’s a perspective that desperately needs to be told at Google.

Google’s biases

At Google, we talk so much about unconscious bias as it applies to race and gender, but we rarely discuss our moral biases. Political orientation is actually a result of deep moral preferences and thus biases. Considering that the overwhelming majority of the social sciences, media, and Google lean left, we should critically examine these prejudices.

Unfortunately, in today’s toxic corporate diversity culture such a memo is a suicide note.

Mr. Damore is already being smeared as an Alt-Right fanatic which is the newest catch-all term that the intolerant left uses to label anyone who disagrees with them by throwing them into a nebulous group that ranges from anyone who has ever been critical of Hillary Clinton or U.S. foreign policy towards Russia to full-blown white supremacists. Most of America never even heard the term until Clinton used it as the basis of one of her demagogic speeches on the campaign trail last year. Now Damore has become just another member of that basket of

Most of America never even heard the term until Clinton used it as the basis of one of her demagogic speeches on the campaign trail last year. Now Damore has become just another member of that basket of deplorables that holds those who do not adhere to the false religion of identity politics.

Forced diversity is to corporate America what eugenics was to the Nazis and it is only going to continue to proliferate unless there is an honest national discussion on how damaging that such practices truly are. Hopefully Damore’s letter can be the start of that conversation.

Silicon Valley Firms Are Even Whiter and More Male Than You Thought

Our exclusive data shows that Google, which just released diversity numbers, lags further behind than other major tech firms.

JOSH HARKINSON MAY. 29, 2014 12:15 PM

The gender and ethnicity of Google’s overall workforce Official Google Blog

After stalling for years, Google finally released data on the diversity of its workforce Wednesday, admitting that the company is “miles from where want to be.” Lazlo Bock, Google’s senior vice president of people operations, noted that “being totally clear about the extent of the problem is a really important part of the solution,” adding that the company is supporting code education among historically underrepresented groups.

But those efforts may not be enough. Exclusive data obtained from the Labor Department by Mother Jones shows that top Silicon Valley tech firms lag far behind the general population in diversity, and that while Google is average in its recruitment of women, it has even fewer African-American and Latino employees than other major tech firms.

Google is far from the only Silicon Valley firm that has been tight-lipped about its demographics. Though large companies are legally obligated to report race and gender stats to the federal government, tech firms such as Google, Apple, and Oracle long ago convinced the Labor Department to treat the data as a “trade secret” and withhold it from the public. Mike Swift of the San Jose Mercury News sued the department to get the numbers. In 2010, following a two-year legal battle, he ultimately settled for stats for a handful of the Valley’s largest companies.

Swift’s data went through 2005. To get an update, I filed a Freedom of Information Act request a few months ago asking the Labor Department for its latest race and gender data on the top 10 firms. In order of largest to smallest by market capitalization, it now consists of Apple, Google, Oracle, Cisco Systems, Intel, Gilead Sciences, eBay, Facebook, Hewlett-Packard, and VMware. When I reached out for comment, most of these companies didn’t get back to me. Google responded that it intended to make its stats public, as it now has. The chart up top shows stats for Google’s workforce overall. The nontech workforce is a lot more balanced. But when you look at just the tech jobs, things are far less diverse. For example, 83 percent of the tech jobs are held by men, and 94 percent of those workers are white or Asian.

Google’s tech workforce is far less diverse than its overall workforce. Google

The data I obtained shows that Silicon Valley’s race and gender disparities also are wider when limited to executives and top managers, and more dramatic when compared to the makeup of the state workforce. Google’s stats reflect the same: Its “leadership” is 79 percent male and 72 percent white, which would put it a bit ahead of its peers, except that the report is vague about which specific positions are being included. Here’s what things look like for the Valley’s Top 10 firms, based on our Labor Department data:

The data obtained by Mother Jones illustrates that “many companies pay lip service to diversity rather than making the real changes,” says Telle Whitney, president and CEO of the Anita Borg Institute, a Palo Alto-based nonprofit that promotes the recruitment and retention of women in technology.

Though the technology gender gap originates in college—only about 18 percent of computer science graduates are women—Whitney believes that the imbalance ultimately stems from the failure of Silicon Valley’s leaders to groom more women for top positions, which in turn discourages younger women from entering the field. “First it has to be a priority to have a diverse workforce,” she says. “And the priority has to come from the top.”

Not all of a tech firm’s employees work as coders or engineers. But among those people directly employed in technology positions at Bay Area tech firms, Asians have actually surpassed whites as the dominant racial group:

These numbers are driven, in part, by the heavy reliance of tech companies on the H-1B visa program, which allows US firms to import up to 65,000 foreign workers each year to fill jobs that require “specialized knowledge.” In 2012, more than 40 percent of the H-1B workers in the United States came from India, China, or South Korea. Many of them earn less money for comparable jobs than their American counterparts, which is perhaps one reason why major tech firms have lobbied furiously in Washington to increase the H-1B visa cap.

But Asian Americans are also represented at a high rate in Silicon Valley, and are overrepresented among high school students taking the AP computer science exam:

Prominent techies like to say that the Valley is a pure meritocracy, but the glaring disparities make that a dubious claim. “In polite company, I would say it’s a fallacy,” says Laura Weidman Powers, the executive director of Code2040, a San Francisco-based nonprofit that promotes racial diversity in tech hiring. “In impolite company, I would say it’s bullshit.”

Powers doesn’t think tech corporate leaders are discriminating deliberately; the factors working against black and Latino candidates are more subtle and structural. “Referrals are a huge source of inbound talent for these companies, even when you look at a company as large as a Google or a Facebook,” Powers notes. Given that most Americans run in the social networks of people who look like them, the system benefits the Valley’s dominant groups at the expense of those on the outside.

Code2040 tries to disrupt that dynamic by actively recruiting talented African American and Latino computer science graduates and plugging them into internships at tech companies. But the group still struggles to convince CEOs to make diversity a goal. “For the tech industry, this is newer,” she says. “There is a pretty pervasive mindset of ‘Oh, we’re colorblind. We just see talent.’”

The best case for increasing diversity in Silicon Valley may be financial. Powers’ group gets its name from the year 2040, when people of color are expected to make up the majority of the US population. She argues that tech firms need to hire more people who reflect and understand their customer base. “For any company that has a consumer-facing product” a few years from now, she says, “the communities that use that product will look different.”

Correction: A previous version of this post included a chart showing diversity at Silicon Valley’s top 10 companies in 1999 vs 2012. There was a misinterpretation about one of the datasets used for the chart, so we have since removed it. In addition, the article has been amended to address Google’s breakdown according to tech and nontech jobs, and “leadership” positions.

Diversity stats: 10 tech companies that have come clean

Tech companies often draw criticism for being exclusive and lacking diversity. Here are ten companies that have released diversity numbers to the public. See how they compare.

By Conner Forrest |August 28, 2014, 5:00 AM PST

Diversity is a hot topic among tech companies. More and more, companies are no longer making excuses, rather, they are taking actionable steps to be more diverse in terms of both gender and ethnicity. From corporate giants to early stage startups, many companies are working towards transparency in the workplace.

The following ten companies have released workforce diversity reports. Here’s how they compare.

Google

Google was one of the first big companies to release a report detailing its diversity. Global gender data indicates that Google employees are 70% male and 30% female. Google’s ethnicity data refers to US employees only, and indicates 61% white, 30% Asian, 4% identifying as two or more races, 3% Hispanic, 2% black, and 1% other. Google also has employee resource groups for employees, including groups for Googlers of specific races, veterans, women in engineering, and LGBT employees.

Apple

Apple’s diversity report indicates the same global gender ratio as Google, with 30% female and 70% male employees. When broken down into roles specified as “tech,” that ration changes to 80% male and 20% female. Apple’s US employees are 55% white, 15% Asian, 11% Hispanic, 7% Black, 2% as two or more races, 1% other, and 9% undeclared. CEO Tim Cook was recently noticed for his participation in San Francisco’s annual Gay Pride parade.

Facebook

Facebook released its diversity report in June 2014, showing a similar trend in numbers as companies that went before it. Facebook employees are 69% male and 31% female globally. However, jobs labeled as “non-tech” are 53% male and 47% female. Facebook also only released US ethnic data, which showed a workforce with more than half of the employees identifying as white. For tech jobs at Facebook, 41% of employees identified as Asian, with 3% identifying as Hispanic, and 1% identifying as black.

Twitter

Twitter released its diversity report on the heels of Facebook, in July 2014. Globally, Twitter has the same gender spread seen at the other big companies — 70% male and 30% female. While both genders are equally represented at 50% in “non-tech” jobs, the “tech” jobs at Twitter are 90% male and 10% female. Twitter’s data on employee ethnicity was also US-only, indicating 59% white, 29% Asian, 3% Hispanic, 2% black, 3% two or more races, 2% other, 1% native Hawaiian or Pacific Islander, and less than 1% Native American. Twitter also has employee-led affinity groups for employees of color, LGBT employees, and female employees.

Yahoo

Yahoo made headlines when Marissa Mayer became CEO in the summer of 2012, becoming one of the first female CEOs of a highly-visible tech brand. Yahoo’s global workforce is 62% male, 37% female, and 1% un-disclosed. For “non-tech” jobs, Yahoo actually has more female employees than male. Yahoo’s data was released in June 2014, around the same time that many other tech companies were releasing their diversity numbers. At that time, Yahoo reported that its US workforce was 50% white, 39% Asian, 4% Hispanic, 2% black, 2% two or more races, and 2% other or not disclosed.

LinkedIn

At the time LinkedIn reported it’s diversity numbers on it blog, there were 5,400 employees globally. LinkedIn’s global workforce has one of the strongest female representations on this list, with 39% of employees identifying as female and 61% identifying as male. Although, jobs listed as “tech” are 83% male and 17% female. LinkedIn’s US ethnicity reports indicate that the majority of its employees are white at 53%, with the second highest ethic representation as Asian as 38%. However, for “tech” jobs, employees are 60% Asian, 34% white, 3% Hispanic, 1% black, 1% two or more races, and less than 1% other. According to its blog, LinkedIn is trying to better its diversity numbers by partnering with organizations such as the Anita Borg Institute, DevelopHer, and Out & Equal Workplace Advocates.

Pandora

Music-streaming service Pandora lists its diversity numbers on the careers section of its website. Pandora total employee ratio is 50.8% male and 49.2% female, with tech jobs more than 82% male. Leadership at Pandora is almost 85% male. Pandora’s overall workforce is 70.9% white, 12.3% Asian, 7.2% Hispanic, 5.7% two or more races, 3% black, and 1% Native Hawaiian or Pacific Islander. Like others, the company has communities for different employees with Pandora Women for female employees, Pandora PRIDE for LGBT employees, and Pandora Mixtape for employees of color.

Pinterest

Pinterest was one of the bigger “startups” to share it numbers during the summer of 2014 when the Goliaths all started spilling the beans. According to the official Pinterest engineering blog, the company is 60% male and 40% female. Most of Pinterest’s gender ratio numbers show a male majority, but not in business operations. Pinterest’s business employees are 66% female and 34% male, although tech jobs are almost 80% male at Pinterest. Pinterest employees are 50% white, 42% Asian, 5% other, 2% Hispanic, and 1% black.

eBay

eBay’s employees around the world are 42% female and 58% male, with its “tech” jobs split at 76% male and 24% female. eBay’s “non-tech” jobs are only 1% off, in favor of male employees, from being even. US data shows eBay’s workforce at 61% white, 24% Asian, 7% black, 5% Hispanic, 1% multi-ethnic, and 1% other. For “tech” jobs at eBay, 55% of employees are Asian and 40% are white, with numbers for both black and Hispanic employees hovering to 2%. eBay had 33,000 employees at the time of its report on its blog, also mentioning that CEO John Donahoe launched the Women’s Initiative Network for eBay.

HP

In 2013, HP employed roughly 317,500 people worldwide, and tracked its diversity among gender and ethnicity sometimes all the way back to 2009. Worldwide, HP’s workforce was 32.5% female in 2013, with 25.6% of managers being female as well. In total, HP’s US workforce is 71.5% white, 14.22% Asian, 6.9% black, 6.06% Hispanic, 0.74% two or more races, 0.48% Native American, and 0.10% Native Hawaiian or Pacific Islander. In 2013, HP announced Ascend, a sponsorship program for high-performing female employees, and a Women’s Innovation Council. According to the report, HP also partners with organizations such as Leadership Education for Asian Pacifics (LEAP) and the National Action Council for Minorities in Engineering to increase cultural competency.

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SEDUCED BY ISIS

London terror attacker named as Khalid Masood – a 52-year-old body-building obsessed dad-of-three English teacher seduced by ISIS

The Muslim convert used several aliases and had been convicted previously of possessing a knife

BY Holly Christodoulou and Emma Lake

23rd March 2017, 5:50 pm

Updated: 23rd March 2017, 7:47 pm

A KILLER who murdered three people before he was shot dead by police has been named as a body-building obsessed married dad-of-three.

Muslim convert former English teacher Khalid Masood, 52, who mowed down pedestrians on Westminster Bridge before storming Parliament and stabbing a police officer to death, was born in Kent but later moved to the West Midlands.

The three women and five men have been held on suspicion of preparing terrorist acts.

Police said a 39-year-old woman was arrested at an address in east London, a 21-year-old woman and a 23-year-old man were arrested at an address in Birmingham, a 26-year-old woman and three men aged 28, 27 and 26 years old were arrested at a separate address in Birmingham.

A 58-year-old man was also arrested this morning at a separate address in Birmingham on suspicion of preparation of terrorist acts.

Mark Rowley, national lead for Counter Terrorism Policing and Met Acting Deputy Commissioner corrected earlier figures saying three innocent victims – PC Palmer, a woman in her mid 40s and a man in his mid 50s – were killed along with the attacker who was shot by cops.

Mark Rowley, national lead for Counter Terrorism Policing and Met Acting Deputy Commissioner gives a press conference this morning

Scotland Yard confirm seven arrests in raids linked to Westminster terror attackPM Theresa May confirms MI5 know the identity of the Westminster terror attackerMr Rowley said 29 people are being treated in hospital, with five in a critical condition and two with life threatening injuries.

Theresa May has been visiting victims of the attack in hospital. The PM spent around 40 minutes with the injured victims talking to them about their harrowing experiences.

She also spoke to medical staff to thank them for their work, said her official spokesman, who declined to name the hospital where the private visit took place.

Many of those injured on Westminster Bridge were taken to St Thomas’ Hospital, which faces the Palace of Westminster across the Thames. Others went to King’s College Hospital and the Royal London Hospital.

PC Keith Palmer’s former team lay a wreath for the tragic cop

Twelve Brits were injured, with police officers reportedly among those hurt, while nationals from France, Romania, China and America were also hurt.

The Romanian couple who were injured have been named as Andrei Burnaz and Andreea Cristea.

PC Keith Palmer’s former team lay a wreath in memory of those who lost their lives in Westminster terror attackPolice have been also been paying tribute to the dad, and the Met Police announced today they would retire the tragic cop’s shoulder number.

They tweeted: “As a mark of respect Keith’s shoulder number – 4157U – will be retired and not reissued to any other officer #WeRemember #WestminsterAttack”.

Forensic teams carry bags of evidence from Westminster Bridge where a maniac ploughed into crowds yesterday

Police officers in forensics suits search the grass on Parliament Square gardens outside the Houses of Parliament on Thursday morning

Hundreds of detectives worked through the night after the attack which claimed the lives of three innocent victims

Roads have been blocked off around Westminster Bridge after the Wednesday attack

The Met’s SO15 counter-terrorist command have said they believe they know the identity of the terrorist fanatic.

Mr Rowley last night said: “It is still our belief – which continues to be born out by our investigation – that this attacker acted alone yesterday and was inspired by international terrorism.

“To be explicit – at this stage, we have no specific information about further threats to the public.

“Clearly our investigation is ongoing – developing all the time – and is focused on his motivation, his preparation and associates.”

Mr Rowley also reminded the public to be vigilant and report anything that causes concern or raises suspicions to police.

PM sends condolences to Pc Keith Palmer’s family following terror attack in London Westminster

PM on Britain’s response to London terror attack on Westminster

Anti-terror police raid in Birmingham linked to Westminster Parliament attackNeighbours recounted the dramatic moments police swooped in to search the Birmingham flat last night, with the homes near the car rental where the vehicle involved in the rampage had been hired from.

Dozens of officers equipped with machine guns were seen smashing their way into the flat just before midnight, with one witness saying that the man involved in the attack had lived there.

He said he saw three men arrested.

Anti-terror police raid in Birmingham linked to Westminster Parliament attackStuart Bailey, who lives four doors down, said: “There were a load of armed police in the street and on the pavement and I could see three or four in front of me.

“They were all dressed in black and armed with what looked like MP5s (submachine guns) and one of them had six ammunition magazines strapped to his leg.”

Police were still swarming at the site on Thursday morning, with one of the windows of the flat covered with cardboard.

Defence Secretary Michael Fallon on whether killed Westminster policeman should have been armed

More armed police are expected to descend on streets across the UK

Floral tributes are left to the victim’s of yesterday’s attack at the security cordon close to Westminster Abbey

Flowers are laid outside New Scotland Yard after Pc Keith Palmer was killed in the Westminster attack

A police officer is given a floral tribute by a member of the public to lay as a tribute to PC Keith Palmer

Car hire firm Enterprise has confirmed that one of their cars had been rented out and used in the attack, saying in a statement: “We can confirm that the car used in the tragic attack in London yesterday afternoon was one of ours.

“An employee identified the vehicle after seeing the licence plate in an image online. We ran another check to verify, and immediately contacted the authorities.

“We are co-operating fully with the authorities and will provide any assistance that we can to the investigation.

“Our thoughts are very much with the victims of this terrible tragedy.”

Those injured in the Westminster Bridge attack

Theresa May has confirmed 29 people were hurt when the speeding car smashed into crowds on Westminster Bridge.

Seven remain in a critical condition.

The nationalities of those injured have been released, including:

Twelve Brits

Three French children

Two Romanians

Four South Koreans

One German

One Pole

One Irish

One Chinese

One Italian

One American

Two Greeks

Mayor of London Sadiq Khan pays tribute to victims of Westminster terror attackLast night Theresa May held an emergency COBRA meeting following the attack, which she called “sick and depraved”.

In a statement from Downing Street, the Prime Minister said: “Any attempt to defeat those values through violence and terror is doomed to failure.

“Parliament will meet as normal.

“We will come together as normal.

“And Londoners – and others from around the world who have come here to visit this great city – will get up and go about their day as normal.

“They will board their trains, they will leave their hotels, they will walk these streets, they will live their lives.

“And we will all move forward together, never giving in to terror and never allowing the voices of hate and evil to drive us apart.”

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‘MY LIFE HAS COMPLETELY FALLEN APART’

In a message to staff she said: “One of our officers died protecting the public and Parliament. We will never forget his courage.

“My deepest sympathy is with his family and with the loved ones of everyone who lost their lives.

“My thoughts too are with the members of the public and our officers who were injured as well as those people affected by these appalling events.

“As many Parliamentarians have noted, our officers ran towards danger to do their jobs. We are indebted to their bravery.

“Officers and staff from the Metropolitan Police are working as hard as we can to protect the public and our capital city.

“I am grateful for all their efforts.”

TIMELINE OF TERROR

Lone wolf attacker mowed down crowds of pedestrians in 4×4 on Westminster Bridge

He then crashed into gate outside Parliament before stabbing policeman PC Keith Palmer, 48, to death

Armed cops put Westminster on lockdown as attack brought London to a standstill yesterday afternoon

Four people died – including the attacker who was shot by police – and 29 are injured, including seven critical

Eight people arrested today after six raids at addresses in London, Birmingham and elsewhere

Cops believe they know the identity of the suspect who was inspired by Islamic terrorism

The Hyundai used to carry out the attack was hired last Thursday in Birmingham, according to Newsnight

Hero MP Tobias Ellwood attempted to revive PC Palmer but husband and father could not be saved

Theresa May condemned attack as ‘sick and depraved’ before holding emergency Cobra meeting

MPs were locked in House of Commons for five hours

PC Palmer, a member of the Parliamentary and Diplomatic Protection Squad and former Bombardier in the Royal Artillery Army Reserve between ’87-’01 , was killed as he tried to stop the attacker at about 2.30pm on Wednesday, while two members of the public were also fatally injured.

The knifeman drove a grey Hyundai i40 across Westminster Bridge before crashing it into railings, then running through the gates of the Palace of Westminster.

His attack left a trail of destruction as paramedics and heroic bystanders tended to victims on the bridge and at the gate.

One woman hit by the attacker’s car before he reached Parliament was confirmed dead by a doctor at St Thomas’ Hospital.

Others on the bridge suffered “catastrophic injuries”.

Witnesses rushed to help a victim with reports that a car mowed down a number of people on Westminster Bridge before crashing into the gate outside Parliament

A body was seen on Westminster Bridge with police confirming they are treating the incident as a terror attack

Another woman who fell into the Thames was rescued and given urgent medical treatment on a nearby pier.

A party of French schoolchildren were among those targeted on the bridge, while four students from Edge Hill University in Ormskirk were also hurt – two described as “walking wounded”, and others said to have minor injuries.

The attack came on the first anniversary of the Brussels airport bombings.

The Muslim Council of Britain said: “We are shocked and saddened by the incident at Westminster. We condemn this attack and while it is still too early to speculate on the motives, our thoughts and prayers are for the victims and those affected.”

Armed police swarm the area in Westminster after a man was shot following a terror attack

Cops gather outside Parliament after the attacker mowed pedestrians down

London mayor Sadiq Khan said: “London is the greatest city in the world and we stand together in the face of those who seek to harm us and destroy our way of life.

“Londoners will never be cowed by terrorism.”

Home Secretary Amber Rudd said: “I want to thank the emergency services for the quick response and pay tribute to their bravery, courage and professionalism.

“We have the best police, the best security services in the world and we must let them get on with doing their job.

“The British people will be united in working together to defeat those who would harm our shared values. Values of democracy, tolerance and the rule of law.

“Values symbolised by the Houses of Parliament. Values that will never be destroyed.”

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Bill ‘O Reilly: The Media’s Treatment of Maryland School Rape ‘Beyond Anything I Have Ever Seen’

Published on Mar 23, 2017

Fox News’ Bill O’Reilly slammed the mainstream media on Wednesday’s “The O’Reilly Factor” for ignoring the case of two immigrant teens, at least one of whom is in the U.S. illegally, accused of raping a Maryland high school student. “ABC, NBC, CBS did not cover it on their nightly news broadcasts,” O’Reilly said in his “Talking Points Memo.” “CNN did not cover the Maryland story in primetime last night. Ditto MSNBC. That is beyond anything I have ever seen in my 40 years-plus of journalism.

We all know why,” O’Reilly said. “Illegal immigration is a political issue.” The host went on to accuse the media of “allowing the sanctuary [city] movement to pretty much run wild” by opposing President Donald Trump’s hardline immigration policies.
O’Reilly warned that “many Americans have had enough of illegal immigration,” saying that “the federal government has lost control over the immigration process, and … many states and cities will not obey federal law, creating anarchy.” “[There] comes a time when citizens of any country have to demand justice, have to demand protection, demand the law be respected,” O’Reilly said. “We have not, have not, come to that time yet in America.”

Maryland school rape puts spotlight on immigration policies

Montgomery County Public Schools superintendent ”We all take responsibility’

Rockville High School Community Meeting, March 21, 2017

Rockville High School Rape an Example of Why President Trump Puts a Priority on Illegal Immigration: Spicer

Two students accused of raping another student at Rockville High

By Darcy Spencer and Matthew Stabley

White House press secretary Sean Spicer said Tuesday that a Maryland rape case, in which an 18-year-old with a pending immigration case is charged with assaulting a 14-year-old girl, is an example of why President Donald Trump is making illegal immigration a priority.

They approached her in a hallway and asked her to walk with them, police said. Montano asked her for sex, and after she refused, he and Sanchez forced her into a boys’ bathroom, where they both raped her and sodomized her, police said.

“Let’s remember the human side of this, that this is a tragic event that no child, no person, no parent should ever have to deal with,” Spicer said. “School should be a place where a parent puts their child on a bus or drops them off or sees them off and knows that they’re safe.”

Montgomery County Public Schools Responds to High Profile Criticism of Handling of High School Rape Case

A rape at a local high school gets national attention and high profile criticism. Two students are accused of raping a 14-year-old girl at Rockville High School. News 4’s Darcy Spencer explains how the school district is defending itself.

(Published Tuesday, March 21, 2017)

According to court documents, Sanchez, who admitted to having sex with the victim, has had an immigration case pending since August.

According to court records, Montano, who was charged as an adult, was born in El Salvador, where he lived for 16 years, the Associated Press reported. ICE officials would not discuss Montano’s immigration status because he is a juvenile.

“I think part of the reason that the president has made illegal immigration and crackdown such a big deal is because of tragedies like this,” Spicer said. “We act so many times when we talk about this and say why is the president dealing with this, because of this priority. Well, part of the reason is because of the tragedy that this young girl dealt with, had inflicted upon her, whatever the word is, but this is why he is passionate about this.”

Sean Spicer Addresses Rockville High Rape

Answering questions about the Rockville High School rape case at his press briefing Tuesday, Press Secretary Sean Spicer said it is an example of why President Trump made illegal immigration a priority.

(Published Tuesday, March 21, 2017)

He pledged he won’t allow the assault to become a political issue and denounced comments he has seen since the attack.

“While some would try to make this into a question and an issue of immigration, what comes down here is that we serve every student that walks in our door,” he said. “We are a public school system.”

Spicer also questioned the age of the suspects, who have been called ninth graders.

“I think he was 17 or 18 years old,” Spicer said. “How does that person get put into the ninth grade?”

14-Year-Old Girl Raped in Maryland High School Bathroom: Police

Two students raped a 14-year-old girl in a Rockville High School bathroom, according to Montgomery County Police. Derrick Ward reports.

(Published Friday, March 17, 2017)

Smith explained they entered the school system in the fall with no credits, which technically makes them freshmen despite their ages. The victim is in the ninth grade.

Spicer said crime is just one aspect of immigration policy.

“People are victims of these crimes and they’re victims of the economic piece of it; there’s a national security peg, but immigration pays its toll on our people if it’s not done legally and this is another example,” he said.

“I am outraged by the brutal and violent rape of a 14 year old girl in a Rockville public school. Our prayers are with her,” Hogan posted in a Facebook statement Tuesday. “The State of Maryland is calling on Montgomery County to immediately and fully cooperate with all federal authorities during the investigation of this heinous crime. The public has a right to know how something this tragic and unacceptable was allowed to transpire in a public school.”

Hogan accused the school system of withholding information from the Maryland State Board of Education about the rape and the students involved.

“Montgomery County government and the Montgomery County police are cooperating and the school system is not and it appears as if they have something to hide,” he said.

Smith said all the information they have about the case as of Tuesday afternoon was sent to the state board.

A spokesman for Montgomery County Executive Isiah Leggett said his administration is cooperating.

“We want to get bad eggs out of our county, basically, but we don’t want our county police enforcing immigration law, but in this case I think everybody can agree that if these folks are convicted that we don’t want them in our county,” Patrick Lacefield said.

Investigators arrested Montano and Sanchez on school property. They are charged with first-degree rape and two counts of first-degree sexual assault.

“These are very serious allegations carrying a life sentence,” Montgomery County State’s Attorney’s Office spokesman Ramon Korionoff said last week. “The potential of life in prison would be available as we prosecute these individuals.”

Both suspects were ordered held without bond.

Montano is charged as an adult. However, a court-appointed attorney wants him moved to a juvenile facility. He is due in court March 31.

Sanchez will be back in court April 14.

Montgomery County Public Schools records show 27 high school sexual assaults or sexual incidents requiring police response in the previous school year, the News4 I-Team reported, including at least one incident at Rockville High School.

In 2014-2015, the school district reported 14 “sex-related” incidents requiring police response at county high schools.

In April 2014, MCPS told the I-Team it installed mirrors and cameras to reduce blind spots in some hallways of another high school in Rockville after a consensual sexual encounter wasn’t noticed by staff or administrators.

Police described the bathroom where the rape occurred as being in a remote area of the school and said the rape took place early in the morning.

In a Freedom of Information Act request from 2015, the school district reported to the I-Team that it had 5,000 security cameras district-wide.

Smith said Tuesday the district will review all safety procedures in response to the rape.

The incident took place the morning of Tuesday, March 14 inside of the boys bathroom at the high school. Police say the 14-year-old girl was brutally raped by two fellow freshmen who entered the country illegally around seven months before from Central America. They were both placed in the ninth grade.

The victim tells authorities she was dragged into an empty stall from the hallway near the gymnasium around 9 a.m. when she was approached by two male students, later identified as Jose O. Montano, 17, and Henry E. Sanchez Milian, 18. According to court documents, she grabbed a sink trying to get away. Just minutes after the crime, she reported the alleged rape in class.

Terrorist Have 11 Missing Commerical Jetliners

who was that masked man

BY: Bill Gertz

Islamist militias in Libya took control of nearly a dozen commercial jetliners last month, and western intelligence agencies recently issued a warning that the jets could be used in terrorist attacks across North Africa.

Intelligence reports of the stolen jetliners were distributed within the U.S. government over the past two weeks and included a warning that one or more of the aircraft could be used in an attack later this month on the date marking the anniversary of the Sept. 11, 2001, terrorist attacks against New York and Washington, said U.S. officials familiar with the reports.

“There are a number of commercial airliners in Libya that are missing,” said one official. “We found out on September 11 what can happen with hijacked planes.”

The official said the aircraft are a serious counterterrorism concern because reports of terrorist control over the Libyan airliners come three weeks before the 13th anniversary of 9/11 attacks and the second anniversary of the Libyan terrorist attack on the U.S. diplomatic compound in Benghazi.

Four Americans, including Ambassador Christopher Stevens, were killed in the Benghazi attack, which the Obama administration initially said was the result of a spontaneous demonstration against an anti-Muslim video.

A senior State Department counterterrorism official declined to comment on reports of the stolen jetliners.

A second State department official sought to downplay the reports. “We can’t confirm that,” he said.

Meanwhile, officials said Egyptian military forces appear to be preparing to intervene in Libya to prevent the country from becoming a failed state run by terrorists, many with ties to al Qaeda.

Libya remains an oil-rich state and if the country is taken over completely by Islamist extremists, U.S. counterterrorism officials believe it will become another terrorist safe haven in the region.

The officials said U.S. intelligence agencies have not confirmed the aircraft theft following the takeover of Tripoli International Airport in late August, and are attempting to locate all aircraft owned by two Libyan state-owned airline companies, as security in the country continued to deteriorate amid fighting between Islamists and anti-Islamist militias.

Video surfaced on Sunday showing armed fighters from the Islamist militia group Libyan Dawn partying inside a captured U.S. diplomatic compound in Tripoli. The footage showed one fighter diving into a pool from a second-story balcony at the facility.

Tripoli airport and at least seven aircraft were reported damaged during fighting that began in July. Photos of the airport in the aftermath showed a number of damaged aircraft. The airport has been closed since mid-July.

The state-owned Libyan Airlines fleet until this summer included 14 passenger and cargo jetliners, including seven Airbus 320s, one Airbus 330, two French ATR-42 turboprop aircraft, and four Bombardier CJR-900s. Libyan state-owned Afriqiyah Airways fleet is made up of 13 aircraft, including three Airbus 319s, seven Airbus 320s, two Airbus 330s, and one Airbus 340.

The aircraft were reportedly taken in late August following the takeover of Tripoli International Airport, located about 20 miles south of the capital, by Libyan Dawn.

Al Jazeera television reported in late August that western intelligence reports had warned of terror threats to the region from 11 stolen commercial jets.

In response, Tunisia stopped flights from other Libyan airports at Tripoli, Sirte, and Misrata over concerns that jets from those airports could be on suicide missions.

Egypt’s government also halted flights to and from Libya.

Military forces in North Africa, including those from Morocco, Algeria, Tunisia, and Egypt have been placed on heightened alert as a result of intelligence warning of the stolen aircraft.

Egyptian military jets reportedly have conducted strikes inside Libya against Libyan Dawn positions recently, and U.S. officials said there are signs a larger Egyptian military incursion is being planned.

Egyptian President Abdel-Fatah al-Sisi was quoted as denying Egyptian air strikes into Libya have taken place but suggested that military action is being considered.

Secretary of State John Kerry last week told his Egyptian counterpart that the United States would speed up the delivery of Apache attack helicopters, although it is not clear the Apaches would be used in any Libyan operations.

Egypt’s military-backed government appears to be seeking a more significant role in regional security after the Obama administration helped engineer the ouster of Libyan strongman Moammar Qaddafi in 2011. Since then, the Obama administration, through its announced policy of “leading from behind,” has stood by while Libya gradually has spiraled into chaos.

The Libyan government announced Sunday that it no longer controlled the capital of Tripoli.

“We announce that the majority of the ministries, institutions, and associations in the capital Tripoli are no longer under its control,” a government statement said.

Libya’s parliament in August declared both Ansar al Sharia and Libyan Dawn as terrorist organizations working to overthrow the government.

Ansar al Sharia, which is based in Benghazi, recently publicized on social media that it has obtained large numbers of more sophisticated weapons, including SA-6 surface-to-air missiles, anti-aircraft guns, rocket-propelled grenades, shoulder-fired anti-aircraft missiles, assault rifles, and armored vehicles. The group is closely aligned with al Qaeda-linked rebels in Syria.

Abderrahmane Mekkaoui, a Moroccan military expert, told Al Jazeera television, which first reported the airline theft Aug. 21, the alert regarding the stolen jetliners was preventive and covers the region from Cairo to Lagos Nigeria.

Mekkaoui said the jets are being held by the Libyan group called Masked Men Brigade, which was designated as a foreign terrorist organization by the State Department in December.

The Masked Men Brigade is linked to al Qaeda and Ansar al Sharia—the group behind the Benghazi terrorist attacks of Sept. 11, 2012.

Until the Libya Dawn takeover of the airport, announced Aug. 24, two other militia groups, known as Al Qaqa and Al Sawa controlled the airport and all aircraft belonging to Libyan Airlines and Afriqiyah Airways.

Mekkaoui said “credible intelligence” reports given to states in the region indicated the Masked Men Brigade “is plotting to use the planes in attacks on a Maghreb state” on the 9/11 anniversary.

Counterterrorism expert Sebastian Gorka said that if the theft is confirmed, the stolen aircraft could be used in at least two ways.

“The first would be how commercial airliners were used on Sept. 11, 2001, literally turning an innocent mode of mass transit into a super-high precision guided missile of immense potency,” said Gorka, who holds the Maj. Gen. Charles Horner chair at Marine Corps University in Quantico, Va.

“The second tactic could be to use the airframe with its civilian markings as a tool of deception to insert a full payload of armed terrorists into a locale that otherwise is always open to commercial carriers,” he said.

Michael Rubin, a counterterrorism specialist with the American Enterprise Institute, said commercial jetliners in the hands of terrorists could be formidable weapons.

“Who needs ballistic missiles when you have passenger planes? Even empty, but loaded up with fuel they can be as devastating,” Rubin said.

Among the potential targets are urban areas and economic targets, like Saudi Arabia’s oil fields.

“Anyone who has ever flown over Saudi Arabia at night can see refineries like Yanbu lit up like Christmas trees against the blackness of the desert,” Rubin said. “One Saudi security officer once told me that they would only have about 90 seconds to shoot down a hijacked plane from the time it left international airspace to impact in one of the region’s most important refineries.”

Rubin said in 2003 a Boeing 727 went missing in Africa fueling concerns about a terror attack on the U.S. consulate in Karachi.

“What is striking is that more than a decade later, the United States hasn’t taken the need to safeguard what are effectively giant guided missiles seriously,” he said.

A former Libyan general, Khalifa Haftar, has been leading anti-Islamist forces. His group has access to Libyan air force MiG jets that have conducted strikes on Libyan Dawn positions in recent days. Haftar also has conducted military raids in Benghazi.

The United Nations Security Council on Aug. 27 announced plans for new sanctions on Libyan militias and terrorists. In a resolution the U.N. warned of the “growing presence of al Qaeda-linked terrorist groups and individuals operating in Libya.”

US officials say 11 commercial aircraft have gone missing from Tripoli International Airport in Libya – ahead of the 13th anniversary of the September 11 attacks on New York and Washington.

The airport was the scene of a fierce battle that ended on August 26, when fighters from the Islamic Fajr Libya (Dawn of Libya) coalition captured the airport and aircraft belonging to the state-owned Libyan Airlines and Afriqiyah Airways.

Pictures from the airport in the aftermath of the fighting showed severely damaged and totally destroyed aircraft.

Dawn of Libya was identified as a terrorist organisation by the Libyan government earlier this year.

While the US State Department is down-playing the significance of the missing planes, one official was quoted in the Washington Free Beacon as saying: ‘There are a number of commercial airliners in Libya that are missing. We found out on September 11 what can happen with hijacked planes.’

September 11 also marks the second anniversary of the raid of the US Ambassador’s compound in Benghazi, Libya, where four Americans – including including US Ambassador Christopher Stevens – were killed.

Intelligence reports of the stolen aircraft include a warning that one or more of the planes could be used in terrorist attacks in the region. Another scenario involved using a plane with civilian markings to transport armed terrorists to an airport usually open to commercial aircraft.

Al Jazeera reported that the planes are being held by a group called the Masked Men Brigade, and it plans to use them in terror attacks.

Tunisia and Egypt have stopped flights to and from Libya, and countries including Algeria, Morocco and Nigeria are on high alert.

Egypt has conducted limited airstrikes in Libya and is considering increased military action, including ground forces.

The carrier traces its root back to September 1964 when Kingdom of Libya Airlines was set up in conformity with law no. 22. The airline was government-owned, having an initial investment ofLYD 2 million. It began operations flying regional routes in August 1965 using Sud SE-210 Caravelle equipment. Following the carrier starting services along the Tripoli–Benghazi run the Libyans prevented foreign companies that also flew the route to operate on it in order to make room for the national airline to expand.[3] Absorbing Libavia and United Libya Airlinesoperations,[4] international flights radiating from Benghazi and Tripoli began in October 1965, initially serving Athens, Cairo, London, Malta, Paris, Rome and Tunis.[5]

The early years saw Air France providing the company with technical assistance, KLM managing the sales and reservations, and BOAC taking care of traffic, finance and communications.[3] In March 1966, the airline and ATI struck an agreement for the lease of Fokker F27 aircraft to cover short-haul routes,[5] with the agreement coming into force on 15 June the same year.[6] A third Caravelle was ordered in 1968.[3] That year, a study to increase the airline’s productivity was carried out by TWA, concluding that relying the operations on five three-engined, 138-seater jet aircraft, and four propeller-powered 60-seater aircraft were the most suitable choice. The report concluded that the lease of the turboprop F-27s was too costly, and the airline decided to acquire two new aircraft from Fokker in 1969. Regarding the jet aircraft, the Boeing 727 and the Trident were the only options.[7]

From the Libyan revolution to the Libyan Civil War

Following the 1969 coup d’état, the airline was renamed Libyan Arab Airlines,[8]:487 or Jamahiriya Libyan Air Lines, on 1 September.[7] The company suspended its operations for two weeks after the coup.[7] With Beirut and Geneva already being part of the route network by March 1970, nine international destinations were already served.[8]:487 In August 1970, Libyan Arab Airlines ordered two Boeing 727-200s for USD14 million.[9] These two aircraft were part of the fleet by May 1971, along with three Caravelles and two Fokker F27s.[10] Six Fokker F27s —four Mk600s and two Mk400s— were purchased in April 1974,[11] and in May the same year, three additional Boeing 727-200s were ordered,[12][13] aimed at replacing the Caravelles.[7] In 1975, Libyan Arab Airlines was made the only operator within the country. Furthermore, the government committed to cancel their debts with the company on a monthly basis, and any losses the airline would incur should be compensated by the state. Also in 1975, the six F27s ordered the previous year were delivered, and the three-strong Boeing 727 order was partly fulfilled when two of these aircraft were incorporated into the fleet.[7] By April 1976, there were 12 aircraft in the fleet, including four Boeing 727s, four Fokker F27-600s, two Fokker F27-400s, and two Falcon 20s; a Boeing 727-200 and a Boeing 737 were pending delivery.[14] Two more Boeing 727s were acquired in May 1976;[15] in August that year, the carrier took delivery of a Boeing 707-320C to be used by the government.[16] The airline had 1,800 employees at April 1977; at this time, passenger and cargo flights radiating from Benghazi, Tripoliand Sebha to Athens, Algiers, Beirut, Cairo, Casablanca, Damascus, Jeddah, Khartoum, London, Malta, Paris, Rome, Tunis and Zurich were operated.[17] During the year, the Tripoli–Frankfurt–Athens–Tunis–Casablanca and Benghazi–Rome–London routes were launched.[7]

The handover of two Boeing 727-200 Advanced aircraft, due to be delivered in June and July 1978,[18] was blocked amid concerns that Libya was supporting terrorism.[19] Despite the US State Department initially authorising the acquisition of threeBoeing 747s and two Boeing 727s in March the following year,[20] the transaction was blocked in mid-1979 over concerns the Libyan government would use the aircraft to transport military material and personnel, as there were suspicions that Libya played a role in the deposition of Idi Amin in Uganda.[21] Also in 1979, a cargo subsidiary named Libyan Arab Air Cargo was set up. During the year, Madrid, Moscow, Sofia and Warsaw were included in the airline’s list of destinations.[22]

By mid-1980, the number of employees had grown to 2,500, whereas Amman, Belgrade, Cotonou, Istanbul and Niamey were part of the route network;[23] also that year, Karachi was incorporated as a destination.[22] It was informed in May 1981 that Libyan Arab Airlines had ordered eight 44-seater Fokker F27-600s in a deal worth more than £17 million.[24] Ten Airbuses —six A300s and four A310s— were ordered in October the same year.[25] At that time, Airbuses were equipped either withGeneral Electric (GE) or Pratt & Whitney (P&W) powerplants, but the airline ordered Rolls-Royceengines to power them—something that had never been done before, as the former two were manufactured in the United States and there was a ban into force on providing Libya with technology that could possibly have military uses.[26]:1516[27] The order was at least partly cancelled by Airbus, as neither GE nor P&W would provide the engines for the four A310s in the order book.[28]

The company had managed to buy a number of ageing US-manufactured jets, including Boeing 707s and Douglas DC-8s, since 1979; many of them were either cannibalised for spare parts or sold. Three Fokker F28-4000s were bought from Fokker in 1984.[22] At March 1985, the fleet consisted of four Boeing 707s —two -320Bs and two -320Cs—, ten Boeing 727-200s, 17 F27s —two -400s, one -500 and 14 -600s— and three Fokker F28-4000s. Employment at this time was 4,500; destinations served included Algiers, Amman, Amsterdam, Athens, Belgrade, Benghazi, Bucharest, Casablanca, Damascus, Frankfurt, Istanbul, Jeddah, Karachi, Kuwait, Larnaca, London, Madrid, Malta, Milan, Moscow, Paris, Rome, Sebha, Sfax, Sofia, Tripoli, Tunis, Vienna, Warsaw and Zürich, along with an extensive domestic network.[29] However, the airline had to cut most of its international services that year due to a US embargo imposed on the country.[30] In 1986, six more F27-600s were phased in.[22] During the year, Libyan Arab managed to bypass the US economic embargo against the country when the carrier acquired, through intermediary companies,[28][31] ex-British Caledonian GE-powered A310 aircraft forUS$105 million.[32] It was informed that owing to both the lack of spare parts and the inability of Libyan Arab to service the GE engines forced the airline to sold these two aircraft to Air Algérie in 1987;[32] actually, the aircraft were not sold but leased, and the Algerian airline would have operated these two aircraft on Libyan Arab’s behalf, but they later rolled back their decision amid concerns that the United States would take action against Air Algérie, and the two A310s were returned to Libya.[33] Finally, British Caledonian was fined US$1 million (£600,000)[34] for its involvement in the deal, and Libyan Arab kept both aircraft, with Swissair training Libyan crews in order to fly them.[35] Unable to order Western-built aircraft, the airline moved to Soviet-made airframers, ordering three Tupolev Tu-154Ms in 1989.[36]

At March 1990, the fleet consisted of five Boeing 707-320Cs, ten Boeing 727-200s, three Fokker F28-4000s, 16 Fokker F27s (13 -600s, two -500s and one -400), four Lockheed L-100-200s, 21 Ilyushin Il-76s and five Twin Otters.[37] Another drawback hit the carrier following the March 1992 United Nations Security Council Resolution 748,[38] adopted as a consequence of the Libyan government allegedly having supported the terrorists responsible for the bombings of Pan Am Flight 103[39][40] and UTA Flight 772.[41][42][43] The resolution saw a trade embargo being imposed on Libya, which included the delivery of new aircraft or spare parts that could possibly boost the military capacity of the country, whereas Libyan Airlines was denied any landing or overflight rights of third-party countries. Thus, all international flights came to an end,[44] and LAA could only operate on domestic routes.[39][45]

The Libyan Arab Airlines logo, which was used until 2006.

In April 1999, following Libya handing over two men suspected of being involved in the Lockerbie bombing,[46][47] trade sanctions against the country were lifted.[44][48] After this, in December 1999,[49] an order for new aircraft was announced,[50] in a deal valued atUS$1.5 billion.[51] The deal was actually a letter of intent and not a firm order,[52] and included four Airbus A320s, two Airbus A330s and two Airbus A340s.[51] The fact that these aircraft had US-manufactured parts once again prevented the deal to be firmed up as a trade embargo over the country, imposed in 1983,[45] was still in force,[49] and Libyan Arab Airlines sought for alternative manufacturers for the acquisition of new aircraft to replace an ageing fleet of Boeing 707s and 727s and Fokker F27s.[51][52]

Amman became the first non-domestic destination to be served again. Fleet and route network grew further when regional carrier Air Jamahiriya was merged into Libyan Arab Airlines in 2001.[2] In 2006, the airline was renamed Libyan Airlines.[53][additional citation needed]The airline pursues an expansion policy,[54] which is concentrated on European business and tourist customers. Newly introduced destinations like Milan, Ankara,[55]Athens[56] and Madrid have led to a route network similar to the one offered prior to the 1992 trade embargo.

In April 2012, Libyan Airlines was affected by a ban that was imposed by the European Union (EU) on all carriers having anoperator’s certificate issued in Libya from flying into the member countries.[60] The airline was removed from the list of air carriers banned in the EU in December the same year,[61] as well as from the subsequent list released in July 2013.[62]Despite this, as of July 2013 Libyan Airlines served the European market with wet-leased aircraft due to the Libyan Civil Aviation Authority (LYCAA) voluntarily opting for a ban until Libyan crews become re-certified.[57][63][64] The voluntary ban will continue through 2014.[65] No Libyan carriers have been included in the December 2013 version of the list of airlines banned in the EU.[66] Despite information regarding LYCAA’s failure for meeting international safety standards that may lead to an effective ban,[67] as of March 2014 an agreement between Libyan authorities and the EU to lift the ban seems plausible to take effect by mid-2014.[68] In the meantime, by that time the carrier expects to launch operations to new destination within Africa, including Accra, Johannesburg, Khartoum and Lagos.[68]

Corporate affairs

Ownership and structure

The company is 100% owned by the government of Libya.[69] Since 31 July 2007, Libyan Airlines has been a subsidiary of the state-owned Libyan Afriqiyah Aviation Holding Company (LAAHC), together with Afriqiyah Airways.[70]

As a consequence of the Libyan civil war and the resulting no-fly zone over the country enforced by NATO in accordance with the United Nations Security Council Resolution 1973, all Libyan Airlines flight operations were terminated on 17 March 2011, and were resumed in March 2012, after one year of being inactive.[70]

Proposed merger with Afriqiyah Airways

On 31 July 2007,[citation needed] Libyan Airlines became a subsidiary of the state owned Libyan Afriqiyah Aviation Holding Company (LAAHC), together withAfriqiyah Airways. LAAHC is owned by the Libyan National Social Fund (30%), the Libyan National Investment Company (30%), the Libya-Africa Investment Fund (25%), and the Libyan Foreign Investment Company (15%).[74] On 21 September 2010, it was announced that the two airlines, which had already begun extensivecode-sharing and set up joint ground handling, maintenance and catering services, were to merge by November of that year, which was later postponed indefinitely, though.[75][76]

The proposed privatisation and merger with Afriqiyah Airways has also been postponed, despite the fact it was originally planned to be effective in November 2010. The two carriers were later expected to merge in late 2011, however the Arab Spring and poor organisation forced this deal to be postponed many more times. Both airlines are to merge by the first half of 2013, according to Libya’s current Interim Transport Minister Yousef el-Uheshi – 12 to 13 months after negotiations are expected to resume in March 2012. The successful merging of the carriers depends on the government’s ability to cut costs in both workforce and salaries, which rival European carriers in size.[77]

In September 2010,[90][91] Libyan Airlines took delivery of the first of seven Airbus A320s ordered in 2007.[92] In October 2010, with five CRJ-900s already in operation, three more aircraft of the type were ordered for US$131.5 million, and three more were taken on option.[93][94] In late June 2013, the carrier took delivery of the first Airbus A330,[95][96] becoming a new customer for the type.[97][98] A second A330 was phased in a month later.[71][99][100] In January 2014, the A350-800 order was switched to the -900 model, with the addition of two more aircraft of the larger variant.[89]

In July 2014, amid the 2014 Libyan conflict, clashes between antagonistic forces that tried to gain control of Tripoli International Airport damaged or destroyed a number of aircraft parked at the airport, including ones belonging to Afriqiyah Airways and Libyan Airlines.[101][102][103] In particular, seven Libyan Airlines aircraft resulted damaged during shelling.[104][105]

Current

A Libyan Airlines CRJ-900 on short final to Manchester Ringway Airport in 2008.

As of August 2014, the commercial fleet of Libyan Airlines consists of the following aircraft:[106]

Incidents and accidents

Fatal accidents

On 21 February 1973 at around 14:10 local time, Libyan Arab Airlines Flight 114 from Tripoli to Cairo, which was operated by a Boeing 727-200 (registered5A-DAH), was shot down by Israeli fighter aircraft because it was thought to be a foreign military attack aircraft. Among the 113 people on board, only one crew member and four passengers survived the subsequent crash-landing in the desert near Ismaïlia.[110]

On 2 December 1977, a Tupolev 154 (registered LZ-BTN), which was chartered by Libyan Arab Airlines from Balkan Bulgarian Airlines to operate a Hajj flight from Jeddah to Benghazi crashed near Benina International Airport because of fuel exhaustion. The aircraft had been circling the airport because it could not land due to dense fog, and an alternate landing strip could not be reached in time. 59 of the 159 passengers died in the accident, whilst all six crew members survived.[111]

On 22 December 1992, Libyan Arab Airlines Flight 1103, a Boeing 727–200 registered 5A-DIA, disintegrated on approach to Tripoli International Airport. The official government story was that it had collided with a Mikoyan-Gurevich MiG-23 of the Libyan Air Force over Tripoli. Both aircraft crashed, killing all 157 persons on board the Boeing but the 2 crew of the air force jet ejected safely,[112] making it the worst accident in the history of the airline. However, according toAli Aujali, who served as a diplomat under Muammar Gaddafi, the dictator intentionally ordered the flight to be shot down to falsely demonstrate the ill effects of western sanctions against Libya.[113]

Non-fatal incidents

On 28 November 1981, a Libyan Arab Airlines Fokker F27 Friendship (registered 5A-DBE) was damaged beyond repair in a forced landing in the desert nearKufra, which had become necessary because the aircraft had run out of fuel.[114]

On 6 June 1989, an LAA Fokker F27 (registered 5A-DDV) experienced an engine failure shortly after take-off from Zella Airfield for a flight to Tripoli. The crew tried to return to the airfield, but had to execute a forced landing in the desert instead, during which the aircraft was destroyed. The 36 passengers and three crew members survived the crash.[115]

On 15 July 2014, a Libyan Airlines Airbus A330 (registered 5A-LAS) suffered a substantial damage in the right hand fuselage during the fighting actions at Tripoli International Airport. The aircraft is now stored for maintenance.[121]

Hijackings

On 24 August 1979, another Boeing 727 was forced to divert from its Benghazi-Tripoli route and land at Larnaca.[123]

On 16 October of the same year, a domestic flight from Hun to Tripoli was hijacked by three passengers, who forced the Fokker F27 Friendship (registered 5A-DDU) to divert to Malta. After two days on the ground at Luqa Airport, the perpetrators surrendered.[124]

On 7 December 1981, an LAA flight from Zurich to Tripoli was hijacked by three persons who thus wanted to press prisoners free. The Boeing 727 was flown toBeirut, were the perpetrators surrendered.[125]

On 20 February 1983, Flight 484 was hijacked en route a flight from Sabha to Benghazi. The two hijackers forced the 727 (registered 5A-DII) to land in Malta, and surrendered three days later.[126]

Also in 1983, on 22 June, an LAA Boeing 707 was hijacked during a flight from Athens to Tripoli, by two persons who demanded to be taken to Iran. During the negotiations, the aircraft was flown to Rome and Larnaca, where the hijackers surrendered.[127]